Software audits are a fact of life. It is not a question of IF you will be audited, but WHEN. While most of our blog posts have focused on the audit process itself, one step that must not be overlooked is the inevitable negotiation with the software vendor at the end of the process.

The negotiation cannot be avoided

Can good SAM [Software Assets Management] /ITAM ]IT Asset Management] processes save you from the negotiation altogether? Unfortunately not. While good SAM/ITAM will put you in a better position to negotiate, you still have to negotiate.

So while you cannot stop the inevitable, there are many things you can do

to come out with the best possible outcome:

  • Timing: Don’t negotiate too early or too late

If you meet with the vendor too early, you might not have all the data needed for the negotiation. The vendor will understand your intentions and have time to get ready to counter your resistance.

If you meet too late you will be negotiating with your back to the wall as there will be no time to understand what your renewal options are, leading to renewing with “whatever the vendor recommends” which is rarely for your sole benefit.

  • Understand what you got last time

This is likely not the first time you (or your company) has negotiated with this software vendor. It is important to find out what was agreed last time. Since most negotiations take place many years apart (usually 3-5 years) it is important to keep good documentation from each negotiation so that you or your successor understands the concessions that were agreed last time. In particular you should look for:

  1. Any special benefits that were awarded
  2. Specific amendments you had for your agreement
  3. How much discount was given last time?

If you can collate this information you will have a much better understanding of the concessions the vendor is willing to make. It also gives you a baseline for the negotiation.

  • Benchmark your terms against those given to similar size/sector companies

It can be challenging to find out this information yourself without a consultant. Do you have time to compile a list of “similar” companies to yours and to contact them to find out their terms? Furthermore, even if you can find the time to do this, will the other companies share this kind of sensitive information with you? This is where consultants can give you a real advantage. Since they have conducted hundreds of negotiations for companies like yours, they will know what is achievable.

  • Understand your REALISTIC options for renewing the agreement

For example, if you cannot practically roll back MS Office (uninstall everything and reinstall old licenses you had before), do not use this as a negotiation card, because it is not a real “threat”. Remember, the vendor has done many more negotiations than you so they will often know your options better than you do.

  • Understand the vendor’s sales targets and software strategy

Many times, the vendor will not only have sales targets, but technology ones too. For example, at this time, Microsoft Dynamics 365 is a very strong sales target for Microsoft. This means you might be able to get good terms (discounts, other benefits) on this product. If you are aware of this, it will assist in your negotiation strategy.

  • Investigate the real cost of (genuine) alternatives

We often see customers trying to use the “I’ll just switch to Google then” threat during their negotiation, without realizing that Google for enterprise might reach, match, or even exceed the costs of similar Microsoft offerings. If you intend to switch to another vendor, make sure it is saving you money/time/management costs and is genuinely a like-for-like product where a price comparison can be justified.

  • Don’t go alone

It is important to use a professional with experience in negotiation as they will be better positioned to see the bigger picture and can be your right hand in getting the best terms you can.

Remember, software vendors hire professional negotiators for these discussions. Unlike you, these professional negotiators do this every single day. This means they understand their software’s pricing, strategy, license terms etc. far better than you ever could, putting them at a distinct advantage. There is nothing you can propose or any trick you can try that they won’t have seen before.

If you attempt to negotiate by yourself, you will start the conversation with a clear disadvantage. Would you go to court without a lawyer to defend you? Exactly. That is why you shouldn’t negotiate with your vendor without a specialist.

Contact us and We’ll be happy to help:

May 2021