Time Your Purchase

Everyone knows that if you buy a car at the end of financial year run-out or a major piece of hardware just before a new product release you will save yourself a lot of money, McIsaac says. Exactly the same principle applies to buying software.

You should always be prepared to play hard ball, playing vendors off against each other and keeping them hanging on whenever possible to pressure them on prices. "We've seen people drive extraordinary discounts - I mean in excess of 70 per cent software discounts - by negotiation brinkmanship right up to the last hour of the last day of the financial year, and refusing to sign contracts. [They say] we want another 10 per cent off or we won't sign it until tomorrow. And typically in very tough times where everybody is fighting for revenue, [vendors] will discount for the revenue," McIsaac says.

You should also be very reticent about buying forward, knowing the price of everything inevitably drops over time. Oracle's pricing has dropped by between 30 and 50 per cent over the past two years because of pressure from its competitors. You are likely to get much better prices over the long haul by buying only what you need when you need it, rather than buying forward.

Using storage as an example, McIsaac illustrates how tough negotiations can keep the vendor under pressure and give them strong incentives to remain flexible on price. Say you expect to buy 20 terabytes of storage over the next four years. Tell your vendor your plans (without making any commitment), but only buy the frame and the half a terabyte you need today, letting them know that in six months' time you'll probably buy some more. Make sure they know you expect a competitive price, and make it clear that you will expect a price decline of between 35 per cent and 40 per cent per annum for future purchases.

"What you're actually negotiating is an option to buy, but no commitment," McIsaac says.

A 40 per cent per annum decline in price gives you a saving of 20 per cent in six months, so by putting off your second instalment purchase by just half a year you can significantly help your bottom line. And since storage needs tend to expand more over time, by the time you get to the fourth year you'll be buying huge volumes at a collapsed price. McIsaac says organisations can halve the cost of a big purchase by staging it over four years with a big price decline.