Bring your best tactics to the negotiations table

You might have expected a blog series on negotiating software deals to have more about the actual negotiating. But the truth is that, if you get the preparation right, you don’t need to be the world’s greatest poker player to secure a commercially and technically favorable outcome.

Still, it is important that you consider both your tactical and strategic approach, including being prepared before you receive the vendor’s initial quote, so you can then make data-driven decisions on the best course of action.

Negotiating is a two-way street

Don’t expect a strategic vendor to arrive with its best and final offer initially. For effective negotiations, you will need a clear and optimized bill of materials (BoM) based on the current and future needs of the persona groups in your business. Like you, the vendor will be aware that – for deeply embedded, complex and business-critical systems – a move to another vendor’s solution is fraught with risk, expense and a significant amount of time and resources. So it is in everyone’s best interest to reach a mutually beneficial agreement that builds trust for the long term.

The vendor has detailed information on your current agreement and the associated rights and obligations. It also probably has a pretty accurate picture of your current usage. And don’t forget the vendor has only one simple objective: your signature on a contract or renewal to secure your ongoing business. For this reason, it is crucial for you – or anyone else in your organization – to not give away unnecessary information in the run-up to or during negotiations. Think about how your business sells its products: your sales team uses all the contacts they have to gain as much intelligence on the potential customer before they negotiate a deal. Your software and cloud vendor will do exactly the same, so it’s critical that you are prepared.

Stick with the plan and don’t get distracted

Software publishers excel at understanding their customer’s businesses and negotiating during the sales process – this is what they do day in and day out. So don’t underestimate your counterpart. And be prepared to frame the agenda and timings to suit your goals – these are your negotiations.

Be wary of surprise new offers of bundles of services or products. You might find that extending or adding to your contract brings better value than a new contract could. There might be opportunities to purchase the software in a package, bundled in with hardware or services, and get a better deal as a result. But consider that possibility carefully and don’t let it distract you from your original goals and BoM. Unless it’s of real interest to your business, stick to your BoM.

When looking to find the best value for your business, remember that only part of negotiations involves price.

Your approach during negotiations is key

Always keep negotiations professional and polite. Never get emotional or too hung up on achieving a certain percentage off list price. You might well receive an offer that surprises you or requires further thought or analysis. There is no shame or loss of face in simply pausing discussions for a brief time while you think, calculate and discuss options internally.

It is also worth mentioning that waiting until the last minute won’t get you the best deal. In fact, a better tactic is to make sure you have ample time to pursue discussions long before the contract ends.

Let’s be honest here: A strategic vendor can probably survive without your business much more easily than your business can survive without their products. Refusing a deal and hoping they’ll make an amazing offer just before the deadline is a high-risk strategy. This isn’t about just one vendor, either – all the big vendors have their own discount policies and their own drivers for giving you a better deal. You need to know what those drivers are.