Discover how ISG’s enterprise agreement software negotiation for a leading health, consumer goods and life sciences company resulted in an $65.1 million (36 percent) proposal cost reduction over three years.
Opportunity
A global health and life sciences leader needed help negotiating its enterprise agreement (EA) renewal with Microsoft. The current renewal discussion centered on transforming the Office 365 model from a pure subscription service to a consumption-based model that would provide greater enrollment flexibility and fewer fixed commitments and costs.
While the opportunity to create new efficiencies through the use of Office 365 had captured management attention, the fixed user costs were extremely challenging and exceeded any current-year budget forecasts. It was also outside the company’s ability to achieve a realistic time-to-value outcome based on the proposed spend.
While the opportunity to create new efficiencies through the use of Office 365 had captured management attention, the fixed user costs were extremely challenging and exceeded any current-year budget forecasts. It was also outside the company’s ability to achieve a realistic time-to-value outcome based on the proposed spend.
Imagining IT Differently
ISG benchmarked the proposal price elements, identified opportunities, developed a negotiation strategy and gained the company’s approval. Then we executed negotiations with Microsoft focusing on clearly defined use cases and user profiles and a consumption-based assessment. ISG prioritized realistic pricing for users added during each contract quarter. We used aggressive pricing negotiation to afford the company a discounting threshold commensurate with its total spend and the magnitude of the deal over its growth. ISG created a deal framework that resulted in the alignment of annual spend to the actual services consumed and in a material professional services investment by Microsoft to address the deployment velocity.
Future Made Possible
- The company reduced spending by $65.1 million between the initial proposals and the version which closed. The final version contained higher level service offerings than were included in the opening proposals.
- It also received a strategic multi-year agreement that provided additional price protection going into a future 2021 renewal in order to accomplish a complete 5-year plan.
- It completed the transaction based upon budgets that did not account for the transformation expense of going to the Office 365 security services.
- It retained a portion of its ecosystem which was not compatible with the Office 365 services on-premise.
