How to Negotiate Software Contracts When You Have No Second Option

Software contract negotiations can be difficult, frustrating, and exasperating. But they can also be tolerable when it feels like you have cards of your own to lay on the table. Having the option to be able to walk away can be the silver bullet in a negotiation:

“I think I’ll take my business elsewhere. I hear your competitors give out enticing offers to new customers.”

Such words usually drain the blood from the sales reps’ faces and they’ll scramble to keep your business, even if it means they keep it at a lower selling price.

But what if you don’t have that option? What if the software vendor sitting on the other side of the table has you pinned in a corner?

  1. Maybe they have a monopoly on the software that is critical to run your business. There’s no one else selling the software that you need and if you don’t have the software that this vendor is selling, then your business is as good as dead.
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  3. Or it’s possible that, while you have alternative software vendors available, you’ve already implemented this software so thoroughly throughout your company that switching at this point would be impossible.

This seemingly skewed power dynamic means that negotiating a contract feels more like a shake-down.

What can you do other than bend to their demands, which will steadily get more and more outrageous when they figure out they have you chained to your chair?

At Metrixdata 360, we’ve had many clients come to us in just such a predicament and we’ve discovered that while you may not have the option to walk away, there are still a few cards you can play.

Create a Value Gap

While it’s true you need the software the vendor is selling, very few businesses need 100% of their workforce to have every top-of-the-line software product.

Within a workforce, we have usually seen that around 20% to 30% of workers use the software provided to them constantly. These are the power users. They are the ones who need five monitors and a remote laptop stacked with top-of-the-line software.

Then you have the middle-range users — the ones who would need their desktops but maybe only use two or three programs on it throughout the day.

Lastly, you have people who are on their feet all day, users who share a single computer, or employees who only use software to clock in and out of their shifts.

Software vendors usually arrange their contracts so that 100% of your workforce is licensed as though everyone needs the same amount of software as the tech-heavy user. This is often the source of a lot of wasted money and can be solved by creating multiple “worker types” throughout your company, each with their own licensing requirements to account for the variety of work that is needed to run your company.

If you’d like to learn more about how you can create the value gap with your software vendor, check out our video, The Microsoft Office 365 Value Gap.

Understand Your Software Contract and Your Position

You need to make sure that you know the contract you’re signing up for inside and out. It is equally important that you understand how your company’s software consumption and usage relates to the contract so you can be sure the work you need the software for is sufficiently covered while avoiding paying for features you won’t use.

Make sure that the terms are clearly defined in the contract. Terms like “users” and “devices” tend to be notoriously ambiguous and can lead to compliance issues down the line.

After you understand the license, ask yourself if there are different licensing models that could suit your needs better.

  • If your business is subject to strict seasonal change, perhaps a subscription-based license would be better suited to your company than a perpetual license?
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  • Is the license model that you’re purchasing completely necessary or are there unnecessary features to it that can be removed if you sign up for a cheaper version (going from enterprise to standard editions, for example)?

Having clear visibility into your company’s software usage will give you the information you need to make these types of decisions. Don’t expect the vendor to simply offer up these cheaper alternatives for you, you need to do your own research because chances are that the sales rep will try to set you up with the most expensive edition with the least effective licensing model.

You can even negotiate for non-standard language to be added into your contract. These are specific clauses that account for your unique software profile.

One client we recently negotiated for was able to create a clause that outlined specific usage around a single day during the year where their business would spike. Don’t be afraid to push for a hand-tailored contract if it gets you the results you need.

Give Yourself Lots of Time

One client we recently negotiated for was able to create a clause that outlined specific usage around a single day during the year where their business would spike. Don’t be afraid to push for a hand-tailored contract if it gets you the results you need.

Since you don’t have the option of going elsewhere, biding your time may not be the best strategy because the software vendors already know there’s little chance in you leaving.

Instead you need to make sure that you are well prepared. You may have to try a few other tactics to move the process along, such as assigning tasks to keep track of progress or escalating the issue to the sales rep’s upper management (a well-placed call to any higher ups could mean the difference during a stalemate).

These tactics will take, above all else, time and patience. It’s recommended that you begin negotiations anywhere from nine to twelve months before the renewal date to give yourself the time you need.

If you’d like to learn more tricks for negotiating your next software contract, check out our article, 5 Simple Tips for Software Contract Negotiation.

You Can Negotiate a Software Contract (Even If You Can’t Walk Away)

Software contracts are a balancing act. But when you don’t have the option to pick your vendor, it may feel like you’re doing that balancing act with lead shoes on.

Although it may be a more challenging process, there are still cards you can play to get a deal that maximizes your software’s value without blowing your IT budget out of the water. After all, IT budgets are only being stretched thinner these days and IT departments are constantly asked to do more with less.

If you’d like to learn more about how you can get the most out of your software, MetrixData360 is here to help. We have negotiated hundreds of contracts with every software vendor in the market today, from Microsoft to VMware. We speak the language of the software vendors and we know how to get you the results you need.

If you’d like to learn more about how MetrixData360 can save you from wasting your company’s money, check out our contract negotiation page!

About MetrixData 360

MetrixData 360MetrixData360 translates software licensing agreements into clear understandings and drives significant cost savings in audits and negotiations.