Is your company looking at a new or renewed Software Contract or Enterprise Agreement with Microsoft, Oracle, or IBM? You’ve come to the right place to learn how to enter your software contract negotiation with confidence.
MetrixData 360 has helped our clients negotiate over 1.5 billion dollars in software contracts. We’ve done hundreds of negotiations and it has made us experts in getting companies the best deal possible. We often see organizations that were only considering an upfront discount for a software contract. This bottom-line discount strategy when negotiating a new
Software contract can result in money being left on the table. In many cases it can end up costing more over the period of the contract.
1. Don’t Wait Until The Last Minute to Start Your Software Contract Negotiation
MetrixData 360 recommends that you start the renewal process 7-9 months prior to the actual renewal. Assessing your footprint for the software publisher as a whole takes time. You should understand your consumption rates for software licensing, as well as things like maintenance or software assurance. You may have been paying much more for software than is required.
2. Talk To All Internal Stakeholders
In a Software contract renewal, we see many times that the entire negotiation is left up to the procurement team. Staff in procurement can be great at negotiating a bottom-line discount. However, they can overlook what is important to other departments like Legal or IT. Having someone that can speak to and ensure that all of the needs of the different divisions in a company are considered is key.
3. Understand the Difference Between What You Need and What You Don’t
Many times in software contract negotiations, understanding what you don’t need is more important than what you do need. Every renewal cycle brings out the sales teams from software companies. They’ll tell you what your business needs and really can’t do without. They’ll say that if you don’t jump on board, your organization will be left behind. We’ve all seen it with the push to cloud based applications. What many organizations fail to do is ask the simple question: what is the return on investment to my business? MetrixData 360 would recommend that you actually go one step further and ask: do you know what your company actually does? In almost every case, software sales teams don’t know. They are only trained to sell you the latest offerings. The ones that equal compensation for them. Understanding this and not falling prey to programmatic sales tactics can save your organization a lot of money.
4. Maintain a Single Point of Contact for the Software Publisher Throughout the Negotiation
These software vendors are strategic partners in your business. Many times they have staff who work closely with different parts of your company to explore or implement their software. When negotiating a software contract those contacts need to be limited and if possible shut down. Communication should only happen via the designated point of contact. It should be treated no different than an RFP. Make no mistake, the publisher sales teams are discussing all potential avenues to upsell. They want to tie their renewal proposals to initiatives that they are all working on. We recommend sending an internal memo that spells out a blackout period. Any contact with the publisher needs to be approved so as not to compromise your position in the negotiation.
5. Hire Experienced Experts To Assist With Your Preparation and Negotiations
Finally, hire experts in dealing with those software publishers. Here at MetrixData 360, we did extensive searches to find the most qualified professionals. They all have extensive and knowledge of the software vendors that spans far beyond software licensing. MetrixData 360’s staff also have a deep understanding of the culture within the vendor companies. They understand the way that sales teams are compensated, the metrics on which compensation is based. Our team knows the right path of escalation for specific requests, and how to ensure they will be accepted and approved. While you deal with negotiating a vendor specific contract every 3 to 5 years, this is what we do every day all year long. Working with experts can get your organization the best deal possible.
*It is important to note that MetrixData 360 does not resell software and does not partner with any software publishers. We feel that doing so would create a conflict of interest. What motivation does a reseller have to get your company the best deal, when they profit from selling you more software? MetrixData 360’s goal in a contract negotiation is to save our clients the most money possible. We want to get them what they need and grow their company’s relationship with the software publisher as a strategic partner.