Mike Austin walked a client through a software audit that cut their $1.6M bill by $1M. He found $400k by reclassifying users to a cheaper tier the contract allowed, and $600k by renegotiating how seasonal spikes were counted. The same process typically saves 20–30% across deals.
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The other day I had a client come to me with a $1.6 million unexpected, true up on a software publisher that I had no clue who they were or what the product did. This is the story of how I saved a client a million dollars on a software contract that I never heard of the publisher and had no clue what the software actually did. Hi, I'm Mike Austin, Sam expert in today's video. I'm going to show you how you can use a proven process that applicable data in order to drive savings like I did for my client the other day. Regardless of how much knowledge you have on a software vendor or their contracting process, this is how you make Sam meet the road and turn into the real life savings that your organization is looking for. Come on, let's go over into my office and I'll show you step by step what I did. So when I'm reviewing a contract, I'm going to look for business terms that are relevant to what I need. So I'm looking for things that tell me how to buy, how much I pay, how to count what the timing of buying is, things like that. I'm not looking for the legal T's and C's around indemnifications or anything like that. So if you look, this software contract here might look like it's pretty daunting in terms of size. But I've actually pulled out a clause here around authorized users. This is actually just off the IBM website because I didn't want to use anything that was confidential, obviously. But I'm going to go through and show you what I am actually looking for and what I do. So when I'm looking at this, I'm going to go through and I'm going to take my highlighter and I'm actually going to highlight the things that are relevant. So if I look here tells me that a user is a unique person. Now it doesn't actually define unique person. So I'm just going to make a thing that says unique person definition because that could be contractors, employees, outside people that access. So elsewhere in the contract they're going to want to see if it defines what a unique person is. It says that it can be installed on any number of computers as long as they have authorized use. So that's, that's good to know. So I'm just going to highlight that as well as it says in here that if they're accessing that program in any manner, directly or indirectly, for example, via multiplexing, okay, that they have to have a license. So it doesn't define what multiplexing is. So again, I'm just going to make a note to find out what multiplexing means so I can understand if there's some things when I'm looking at deployment data I have to be aware of. Okay, so I'm really going through this looking for things that define how I count. You can see unique person. What is that? Is that an employee? Is it a contractor? Because if it's one or the other or both, that's going to give me different counts. Tells me that I have to be aware of multiplexing. So I'm going to have to go and see if multiplexing is happening, which would hide where users are potentially accessing the system. So then it also has a thing that says that a license may not be shared, so there's no concurrency and it may not be reassigned other than for a permanent transfer. So I can reassign it, but it doesn't say how often, it just says it's permanent. So some vendors might have a 30 day or a 90 day reassignment rule. So again I'm going to make a note to go and find out how often I can reassign. So one last comment on the legal review of the contract or the review of the contract before we move on here is that again, I'm not reading the legal language, but I do have to review it and skim through it because I have seen things like where a price increase clause with notification was buried in a tax clause. And so it was important to know how they were going to do price increases and understand that. And if I had to just skipped over the tax clause because I thought that was legal ease, I would have missed that. So I'm not trying to understand the legal contract, I'm just trying to look for business clauses hidden within legal terms that may be to my advantage. Okay, so let's get back to our story. So when after I reviewed the contract for this client, what I realized was there were four definition of user types inside of their contract, but they were only using two different two of those definitions. So I was able to actually go and take a look at the deployment data and realize that they could actually leverage a third one. And when we did that, we were able to pull $400,000 out of the contract right off the bat because we were able to utilize that third user type, there was nothing the vendor could do. We it was contractually allowed. And so it was a very easy change, but something that was missed because of the way they were actually counting their deployments so let me explain that. $400,000 in savings on user type. When I reviewed the language, there was actually different levels of usage that had different price points for them. So I was actually looking in the deployment data for the lower level user types because I knew those were the cheapest. There's a definition that explains how to in the contract determine one type from the other. But when I didn't see the lower user types and I looked at the data and saw that they had usage patterns that aligned to those user types, I was able to leverage that to save the 400,000. So now that brings us to actually deployment data or usage data and reviewing that. So I was fortunate in this case that this customer actually had the data that was required in order to review usage. Okay. If they didn't, I would have had to work with them to go and get that. The other thing that I was lucky here was that they actually had a history, they had two and a half years worth of history of usage of this system. So I was able to review all of that. Now, once I know that how, based on the contract, things work, I'm going to look at that data to actually see the usage and deployment data to see how that applies back to the licenses. So, so what happened here was I read the contract, I found the user definitions that we talked about, but there was no real true up terminology in this contract. It just said that at the month when they had the report to the highest usage in any given month. So when you actually looked at their deployment data, it was pretty consistent across the year, except for in the fourth quarter of every year, they spiked by 300 users for two months and two months only. And then they went back to their consistent run rate. So the contract stated that they had to buy to that peak point. So they were buying licenses that had them buy right up to that pink point, but they were only using them for two months a year. So because we had the data, we were able to go back to this vendor that is in a very competitive space and say, look, we're not paying full price for two months worth of usage. We want you guys to change what you're doing. And we were able to negotiate something different for those extra users that pulled out $600,000. So we saved 400,000 by just looking at the user definition and what was legally allowed in the contract. And then we used deployment data to our advantage to pull out another $600,000, saving them $1 million, taking the $1.6 million spend down to 600,000. So that's how you use this process of reviewing contracts, getting reliable inventory data, and using that to negotiate against the software vendors and how you can do this to save 20 or 30% or more, like we did with the customer in this example. Although we were able to get this customer more, we typically see 20 to 30% savings in software contracts when you follow this proven process. So if you're interested in getting some help on your next software contract negotiation, feel free to reach out and we'd be happy to have a discussion about how we can help you. If you like this video, don't forget to click like and subscribe. And if you want to learn more about software asset management, check out one of these great videos over here to my left. Until next time, I'm Mike Austin. Keep your software safe and your assets. Manage.
