Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200810/20081024/article_378000.htm
Software firms bow to demands for discounts
Created: 2008-10-24
Author:Amy Thomson
ORACLE Corp, SAP AG and competing software makers are bowing to customer demands for discounts of as much as 15 percent to keep contracts as the economy sours.
While technology buyers rarely pay list prices, managers from oil drilling equipment maker Cameron International Corp to government agencies in New York say they are winning steeper-than-normal price cuts. They also are asking for reductions on maintenance fees, the charges for upgrades that have become some software companies' most profitable business, Bloomberg News said.
Discounts may be 10 percent to 15 percent bigger in 2009 than this year as vendors fight for sales amid a credit crisis that is expected to curb purchasing, said Ray Wang, a Forrester Research Inc analyst. Seventy percent of companies are trying to negotiate lower rates, according to a survey from the Cambridge, Massachusetts-based technology researcher.
"If you still want to be my vendor next year, what are you going to do?" said Alfredo Maldonado, information-technology director at Cameron. He said the company won better discounts from suppliers including SAP and Microsoft Corp than in years past. "They push back, but we push back."
New software purchases have slowed to the lowest level in at least eight years, said Jane Disbrow, an analyst at technology researcher Gartner Inc in Atlanta who follows SAP and Oracle, the largest makers of business-management applications.
Spending growth on business programs will slip to 8 percent in 2009 from 10 percent this year, Gartner said. The software runs tasks such as payroll and inventory management.
Still, other areas of software sales including virtualization programs, which help lower energy costs by making server computers run more kinds of software, are holding up and may even increase, according to technology buyers.
While technology buyers rarely pay list prices, managers from oil drilling equipment maker Cameron International Corp to government agencies in New York say they are winning steeper-than-normal price cuts. They also are asking for reductions on maintenance fees, the charges for upgrades that have become some software companies' most profitable business, Bloomberg News said.
Discounts may be 10 percent to 15 percent bigger in 2009 than this year as vendors fight for sales amid a credit crisis that is expected to curb purchasing, said Ray Wang, a Forrester Research Inc analyst. Seventy percent of companies are trying to negotiate lower rates, according to a survey from the Cambridge, Massachusetts-based technology researcher.
"If you still want to be my vendor next year, what are you going to do?" said Alfredo Maldonado, information-technology director at Cameron. He said the company won better discounts from suppliers including SAP and Microsoft Corp than in years past. "They push back, but we push back."
New software purchases have slowed to the lowest level in at least eight years, said Jane Disbrow, an analyst at technology researcher Gartner Inc in Atlanta who follows SAP and Oracle, the largest makers of business-management applications.
Spending growth on business programs will slip to 8 percent in 2009 from 10 percent this year, Gartner said. The software runs tasks such as payroll and inventory management.
Still, other areas of software sales including virtualization programs, which help lower energy costs by making server computers run more kinds of software, are holding up and may even increase, according to technology buyers.
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