MetrixData360 recently attended the Gartner It Financial, Procurement & Asset Management Summit in Orlando Florida. Here are tips that were shared with the approximate 600 people attended the event from companies that ranged from mid-sized organizations to the Fortune 500 on Microsoft Contract Negotiations.
I actually had the opportunity to present to a theatre audience my top 10 tips when negotiating a contract renewal or dealing with a Vendor Audit. Based on the sessions that I was able to attend and the conversations that I had with many of the attendees, I thought it would be good to provide you with my top 10 take-aways from the event.
10 Software Negotiation Tips
- Vendor Sales Reps are highly trained to sell you licenses not value! They are trained to present to you high pricing proposals that include many products and “extras” that are not required, often going to high levels (CIO) within the organization to do so. These proposals often include more products then are needed (positioned for future projects) and are often presented by sales reps that do not have any authority to negotiate.
- Vendor contracts are getting more and more complex and you need to start your renewal process earlier. Traditional on premise type agreements are being morphed into Cloud Based agreements and the T&Cs associated with these are not simple or easy to follow.
- Cloud T&Cs are tough to negotiate. Many of the vendors refuse to negotiate on them. It is important for you to negotiate SLAs and penalties clauses if the SLAs are not met. Accepting the standard T&Cs and SLAs can put your organization at risk.
- It is extremely important for you to include an escalation clause within your contract so that remedies are not discussed with low level account teams that really have no interest in assisting with remedies (that often are contrary to their quota and commission goals).
- So-called Free Software is not Free in the long run. In many proposals, products are added in and then deeper discounts are provided to give the perception that they are free. Our analysis and comments by Gartner Analysts show that these free products can cost millions over the long run.
- Transitions are not free. Similarly when a vendor changes their licensing Metrics, the transitions that the vendors provide are not free! You can see this in our blog post of SQL Server for instance where the transition from Processors to Cores can cost substantially more. Just take the simple example of a 2 Processor 8 Core Server where the price doubles (Based on requiring 2 Processors in the past and now requiring 16 Cores – the price of 2 Processors = 8 Cores, so 16 cores doubles the price).
- The way that you count licenses may not be the way that they count licenses. Make sure it is clear the way that you are counting things like Qualified Devices or Qualified Users and that the vendor agrees. If you cannot get them to provide changes in writing within the contract, get emails that explain how they will count and keep those with your files in case of an audit. Remember: if it’s not in writing within your contract – it does not exist. A conversation with your vendor rep about how they “believe” it works, does not make it legal.
- Audits are now the norm! Gartner (and us for that matter) have seen a rise in the number of vendor audits. It appears that most software vendors are auditing clients at a much higher frequency. In the conversations I had with attendees, greater than 50% have had at least one vendor audit them in the last 12 months. It’s not a matter of if you are audited – its a matter of when. Are you ready? Do you have the expertise and tools in place to ensure you are successful if you are audited?
- IT sourcing/Finance and SAM are starting to become strategic functions within organizations. The leading companies have teams that work together with Procurement and IT to ensure that risks are mitigated in the contract and negotiation process.
- Hire Experts (Like MetrixData360) to assist! Gartner says that you need to hire experts to help protect your interests. With each vendor you get an opportunity to negotiate once every 3 or so years. You need someone that can help you through the negotiation (or audit process) but who is also available to answer questions mid-stream in contracts (ask us about our retainer program).
Looking for More Information on Microsoft Negotiations?
Our Learning Center has plenty of information on the different types of negotiation you may face with Microsoft.
Not Just Microsoft Negotiation Experts
While these tips were originally framed with Microsoft contract negotiations in mind, they apply to almost any software vendor you may find yourself negotiating with. Negotiating with software vendors is a stressful event for any business. Avoid the financial pitfalls of over-licensing or getting pulled into an up-sell that your organization will never use and will cost you more. With MetrixData360, you can traverse Microsoft contract negotiations – or negotiations with any software vendor – with the confidence of having an expert in your corner. Contact us today to set up a consultation to find out where MetrixData360 can save money for your organization’s IT budget.