Changes in the wider IT world will have a significant impact on the cost of
software licensing over the next 10 years, according to an industry analyst.
A report by
Gartner
warns software vendors that they must establish more realistic margins to
guarantee long-term survival in what will become an increasingly competitive
market.
"Up until now the unique nature of the software market has meant that buyers
had very little negotiating power after the initial purchase of a software
licence," said William Snyder, a research vice president at Gartner.
"We expect those dynamics to change considerably over the next five to 10
years giving chief information officers and software procurement officers more
bargaining power, while potentially reducing software vendor profit margins."
Snyder explained that leading application vendors will be particularly
challenged as firms seek to reduce software charges as they have done with
hardware and services costs in recent years.
"Software buyers need to realise that the pendulum is beginning to swing in
their favour and that there are an increasing number of alternatives in today's
software market," he said.
Gartner outlined a number of ways that companies could improve their
negotiating power with software suppliers.
These include using business process outsourcing and software-as-a-service,
taking on open source alternatives, and employing third-party vendors to cut
high maintenance fees on old software.
"Costing out the possibility of using offshore skills to build application
functionality as web services will also help negotiations with vendors," said
Snyder.
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