8 More Tips For Getting A Good Deal In Software Negotiations

#1. Don’t spill the beans. Often, vendors talk to people at buying companies before the negotiations start, then gear the negotiation to the budget. The business ends up thinking they got a good deal, when they may have got another 20% off.

#2. Use your leverage. Let the vendor know it has a credible competitor, but not who it is. It’s also crucial that the negotiator understand the marketplace climate and the relative importance of the deal. Buying a large package from a vendor that’s coming off a poor financial quarter can work to your advantage. A vendor trying to break into your vertical industry may be willing to discount a product to get a foothold in a new area.

#3. Form the negotiating team early. Nothing kills more deals than bringing in the team at the last minute, but that’s what happens about 80% of the time. Too many companies think of contract negotiations in terms of price, when that’s a small component of the deal. Today, people are focused on price, but the risk and investment are a lot higher on the implementation agreement.

#4. Future-proof the deal. What happens if the vendor goes bankrupt, gets acquired, or doesn’t live up to the contract’s terms? Future-proofing a contract gives your business rights. First, escrow the software’s source code. Most times, when a business licenses software, they only get the object code, not the core source code. An escrow clause in the contract lets businesses obtain the core source code should the vendor go bankrupt or sell its assets.

#5. Take advantage of the here and now. Use current negotiations to get better prices on future software purchases. You may be able to get a deal for additional products purchased within the next few years at a pre-specified discount.

#6. Beware of hidden fees. Does your business have the right to relocate the software without penalty? If you need a copy of the software to test a disaster-recovery plan, are you required to pay full price for another license? Such hidden costs can add up to significant extra unbudgeted spend.

#7. Customisation can bite you in the end. Be as specific as possible about what’s being customised and how it should function. If you’re not very clear, the vendor won’t build it right. Vendors often will include a provision that says if a company doesn’t accept or reject the customization within 45 days, the customization is automatically accepted. That shouldn’t be the way it works. A company should have the right to refuse a customization whenever it doesn’t function properly.

#8. Know your definitions. How are you defining a user, a partner, or a customer?

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