With end of year purchasing decisions being made, we thought we would weigh-in on the ups and downs of the Documentum ELA experienced by our clients.
What is an Enterprise License Agreement?
The Enterprise License Agreement (ELA) gives the Documentum purchaser the ability to own Documentum licenses for everyone in their enterprise/company. This is typically referred as the “all you can eat” option since the agreement can typically carry a covenant that, given a certain time period (ex: 1 year), the purchaser will, for one price, own all the licenses if deployed. The purchase consideration typically can go like this:
Client: I would like to buy 10,000 licenses for $X.
Documentum Sales Rep: If you would like, you can buy enough to cover your entire enterprise (say 20,000 people) for $X+$.5X.
Client : What a great deal!!!! I am getting all those extra licenses for half price.
For most part, this looks great to both the client (more for less) and the sales rep (bigger order – more commission). The client can believe that they have everything that they would ever need from Documentum .
Concern One of ELA – Shelfware
The downside of any software ELA , is the tendency of Documentum (or any software) to be over bought and significant portion to become shelfware rather than deployed. If the client above only deploys 10,000 seats in the first two years, what is the business benefit in regards to the additional 10,000 seats at half price and 20% maintenance per year? If it takes five years to deploy all the seats, what is the cost for those three years of capital and maintenance for non-deployed seats? Purchasing might be able to say “Hey, we saved all this money” but it doesn’t drive business benefit without being deployed successfully.
Concern Two of ELA – Ignoring the trends in ECM
As mentioned many times at this site, we are seeing increased pressure on Documentum’s pricing model based on ECM priced as a commodity. This pressure is coming from both SharePoint as well as open source ECM alternatives like Alfresco. We would anticipate that this trend will reduce Documentum prices in the future if they are to remain competitive. Locking in a large deal now does not allow customers to take advantage of that trend and lower prices in the future.
Concern Three of ELA – Products included in ELA
One thing we see from many clients with ELA is that the agreement covers a given number of users as well as a list of products. Concerns of this approach include:
- Outdated Products – Content Intelligence Services is one thing we saw on many clients maintenance agreements. This was a product that never took off. We don’t know anyone that ever successfully deployed it – comment below if you disagree. Paying maintenance every year on a product that you never deploy doesn’t make business sense. •
- Wrong Products – Clients can purchase the ability to deploy Webtop to everyone. As we have shared best “Documentum Top Tips” with clients, we typically talk about how 1) Documentum is moving away from Webtop, and 2) how most clients are moving away from Webtop to more intuitive user interfaces. It doesn’t make much sense to purchase (and maintain) products that might be fading away in the future.
- Right Products – We routinely see the custom client not included in ELA’s as most clients are convinced by their sales rep or others that Documentum should work “out of the box”. Custom clients can leverage our open source or other products and can be a worthwhile investment particularly with Documentum’s new pricing model. Many clients don’t realize that they might want some custom clients in their ELA and have to purchase new licenses.
- Additional Licenses – the ELA is subject to the time it was executed. Newly released products are not included and the upgrade path can be vague. We had one client that bought DCM in before Trusted Content Services (TCS) was a separate package and was included in DCM. After TCS was released as a separate product. A later software audit revealed that this new “product” had not been purchased by the client and resulted in a push by the sales rep for the additional purchase (15K per CPU for prod, dev and test). With the announcement of the new interfaces for 2012, it is important for clients to clearly establish that their current products (ex: Webtop) licenses will be transferred to the newer products (Unified Client). As products are rebranded or newly released, they may not be included in the software license unless specifically listed.
Concern Four of ELA – Commissioned Sales Rep
The harder issue for clients to understand is that it is in their best long-term interest to maintain an ongoing relationship with their Documentum sales rep. Clients can be misled by thinking that, once this big order is placed, EMC/Documentum is going to focus more on their account given their big purchase history. Many clients forget that, as commissioned employees, a sales rep’s typical reward for making a quota in one quarter is a bigger quota for the next quarter. To illustrate the influence of the commission model, see if you can identify the client that will get the most attention from EMC/Documentum:
- The client that bought an enterprise license agreement last year OR the client that is thinking about buying and enterprise license agreement this year? •
- The client that spent $400,000 two years ago and is just paying maintenance OR the client that has spent $100,000 every year for the last two years.
It is important to understand that sales reps receive NO commission on maintenance, so it is a non-factor for them. To illustrate one cautionary tale, we had a major account that purchased, at the end of one quarter, a significant portion of licenses from Documentum as part of an enterprise agreement. The client had previously been buying licenses department by department and the enterprise agreement allowed purchasing to complete one big volume deal so that clients could roll out Documentum everywhere. The sales representative at the time achieved stellar status from EMC/Documentum and both the sales rep, client and EMC/Documentum were happy with the agreement.
The sales representative eventually left EMC/Documentum and a new representative inherited the account. The new sales representative had a significant concern with the major account for which he hoped to get a commission. What could he sell them that they didn’t already have? The answer:
- Documentum Consulting – We’re not going to go into it here but the client was less than impressed with the price and quality of resources from Documentum.
- New Products – The suite approach allowed the sales rep to offer other products (ex: MyDocumentum, XCP, Outlook Client) that weren’t included in the agreement given the timing of the purchase.
- Documentum Software Audit – after years of little success, the sales representative initiated a software audit on his client. As we have mentioned before, for clients that aren’t buying recently there is an increased risk of being the focus of a software audit. We have had multiple sources (not to be revealed here) tell us that the software audit is typically initiated by a sales rep that hasn’t been able to sell in a while to a client to force a commission. The assumption of the audit is that clients must be using more than they are paying. The software audit can be very disruptive and result in extra charges given changes in the pricing model. We had another client that was audited by EMC/Documentum less than a year after they had purchased significantly hurting the relationship.
Best Practice – Eat as you go
We would recommend that clients buy slowly and continuously add seats and products as they need them rather than fall for the large bundle, “end of the year” deal. Some thoughts:
- Buy when you need it – Pricing models change just like user requirements change and adapt. Buy software when you need it and renegotiate with the new products/pricing model. While the lure of the big purchase to save money can be appealing, rarely have we seen the overall ROI beat small purchase over time given the upfront costs and ongoing maintenance for shelfware. We would also anticipate prices will drop in the future as pressure from SharePoint and open source continue to pressure Documentum and other commercial ECM products. •
- Review maintenance and drop unused products– if you have products you have bought but haven’t deployed in 2+ years, treat them like full boxes of misc items from a house move that you haven’t touched in 5 years – best to place them by the curb.
- Keep buying to keep the sales rep (and software audit) at bay – nothing interrupts Documentum momentum like the Software Audit. Keep it at bay by buying over time rather than a big purchase to reduce your risk of a software audit.
Other Purchasing Best Practices
While on the subject – including some other common software purchasing thoughts:
- Anticipate the “end of quarter” deal – commissioned driven sales reps will always steal from tomorrow for today. Use it to your advantage.
- Nobody pays list – even small purchases are often discounted to help close the deal.
- Anticipate the “double the quantity for half the rate” deal – the bump-up to get a bigger amount is pretty common. Smart negotiators start with small number (less than they need) first.
Let me know your thoughts below on ELA – successful or unsuccessful?