Tips for Getting the Best Software Deals
Tips for Getting the Best Software Deals
By Donna Fluss
Every prospective buyer strives for a great deal on software purchases. To get the best results, it is important to understand some of the nuances of the procurement process and best practices when contracting for software and systems implementation. DMG Consulting offers the following tips to help you acquire what you need and keep the costs down:
- Plan before you buy Dont make purchase decisions quickly. Understand what your requirements are (must-have versus nice-to-have) so that you wont get caught up in the vendor hype and purchase things you dont need and wont use.
- Know your vendor Find out what motivates the software vendor. Vendors often provide higher discounts for early adopters of certain functionality in order to obtain reference accounts. Also, if you are licensing newly developed software, it will be a high-risk implementation; use this as leverage for obtaining additional discounts.
- Understand revenue recognition policies Vendors will often be more flexible on pricing when the timing of the purchase is near the close of their fiscal quarter or year.
- Consider professional negotiators Designate a negotiator as the central point of contact with software vendors. Using a trained and experienced negotiator helps remove the perceived urgency to get a deal done quickly. Negotiators maintain vast databases on the costs of software and the discounts attainable. In addition to negotiating on cost, they focus on contract terms and conditions that can decrease initial expenses and yield savings over several years.
- Keep it to yourself Although you may have a preferred vendor, its best to not to show your hand. Once a vendor knows their product has been chosen or is a front-runner, you immediately lose leverage in the negotiation process.
- Buy only what you know you will use To help decrease costs, purchase only what is needed to get your project going. Implementing new applications often takes three to six months. When bargaining with vendors, try to negotiate the cost of the software licenses first and the date of delivery second, so that the costs of licenses are spread over multiple quarters, or even years. If you are implementing in one contact center first and adding other centers later, purchase only the licenses for the first center up front, but lock in the pricing for subsequent purchases and take delivery only when the other centers are brought online.
- Recognize that per-user seat costs dont tell the whole story These costs are not the most accurate number on which to base corporate investment decisions. Use caution when evaluating per-user costs because you must add in all of the design, configuration, integration and training costs to get the full picture.
- Ask for price protection Because additional licenses are often required after the initial implementation, negotiate price protection for a minimum of two years for future purchases.
- Delay support and maintenance Most vendors begin charging for support and maintenance the day the contract is signed. Negotiate to delay the start of support and maintenance until the go live date. Also, put maintenance caps in place and ensure that entitlements (upgrades, bug fixes, support days and times) are guaranteed as part of the signed contract. In fine print, vendors may reserve the right to change entitlements at any time.
- Account for ongoing maintenance After the initial implementation, internal employees will have to maintain the system, unless it is a hosted solution or a managed service. Budget for maintenance up front using the fully burdened cost of each employee whose job will involve ongoing operations, bug fixes, upgrades and systems administration.
- Note that training is not one a one-and-done exercise Plan for initial training for all employees (agents, supervisors, managers, business analysts, system administrators and potentially, customers and business partners). However, because employees come and go, you should negotiate to lock in pricing for the refresher training that will undoubtedly take place one or two years post-implementation.
- Realize that software is only a small percentage of the overall project cost The largest costs of an initiative are for services, the vendors or third-parties. Use internal resources as much as possible throughout the project to reduce these costs. Train internal staff as early as possible so that knowledge transfer is conducted throughout the project and internal employees can assume more of the work as the project progresses.
- Freeze consulting billing rates With the exception of nominal annual increases, you should contractually lock in billing rates or cap rate increases to complete the project. Many vendors increase consulting rates yearly, upon consultant promotions or when a change in ownership occurs.
The real key to getting a good deal on software is to have a positive rapport with vendors. As in any partnership, being able to have up-front and straightforward discussions is important for building a good ongoing working relationship. The most important factors in a successful negotiation and a sound agreement are mutual trust and respect between the buyer and the vendor. The purchase is the end of the negotiation, but only the beginning of the relationship.