Software Negotiation Tips for IT Purchases

By Gregg Spivack

Vice President of Client Services, NPI

October 12, 2021

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Negotiation leverage isn’t always easy to come by in IT buying – especially for more routine “auto-pilot” transactions like renewals. A few recent purchase optimizations we helped clients with got us thinking about how we achieved savings despite low leverage. These were mainly renewal events focused on maintenance and support, although there were some first-time purchases too. Each situation was unique, but the gist was this – fair market value pricing targets revealed there was room for improvement, but there was little obvious leverage for negotiating better pricing and discounts. These clients needed creative ways to push the needle in the direction of savings.

Negotiation Leverage Tip #1 – Validate Usage

With subscriptions and software renewals, it’s wise to periodically conduct a formal assessment to validate that everything you are paying for is actually being used, and that license types are optimized for the job at hand. Cloud offerings usually have a means to run reports on activity and usage, but on-premise software often requires more digging. Build a buffer into your vendor negotiation timeline to validate what’s being used, by whom, and for what purpose. Unused and underutilized licenses lead to spend waste. As much as vendors want to profit from the extra fat, it’s hard to refute validated usage data and make a case against right-sizing a renewal for savings.

Negotiation Leverage Tip #2 – Focus on Support

Be sure to ask for details on support inquiries, support ticket resolutions and the type of issues that are occurring. The lack of support tickets, type of support tickets and resolution insights could create meaningful topics for your vendor discussions. Like usage, this unearthing will bring clarity to your actual (versus assumed) support requirements and how well your vendor is meeting them. For example, do you really need to pay for premium support when a lower tier of support will cover most of your issues? Or are you paying for the right level of support, but your vendor is routinely missing SLA targets? The hardest part about this is to remember to ask well in advance of the renewing event so the vendor doesn’t slow play you to the finish line.

Negotiation Leverage Tip #3 – Analyze the Vendor Roadmap

It’s important to ask for the latest vendor roadmap and even a historical view of what’s been released. What a vendor can share will vary, but resistance is typical and a comprehensive document is rare. If there’s a specific capability you’d like the vendor to deliver in the near future, ask for clarity on its timing (this usually requires the Sourcing team to poll business and IT stakeholders in advance). If given enough incentive, the vendor sales rep might go back and get something from the Dev team. In some cases, software vendors may share a release schedule while others will provide a meeting with the product manager depending on the size of the client.

A key goal of these efforts is to learn if any ideas you’ve contributed have made it on the roadmap and to assess the state of R&D. Is R&D dwindling or robust for the solutions you use? With all the M&A occurring in the space, you may find you own a title that’s not the favored solution anymore. An expected feature may be delayed. Your core titles may be in an ongoing steady state requiring minimal support (even as you pay high support and maintenance costs). The point is seeing this info could create a storyline that equals leverage for you. As an example, when CA bought Rally Software several years ago it was not deemed a strategic product and investment quickly waned. Knowing this helped customers negotiate more competitive pricing.

Negotiation Leverage Tip #4 – Map Your Spend to Their Portfolio

NPI advises clients to understand how their footprint maps to the complete solution portfolio of their top vendors, including your annual spend by product. If you have a strong story, this broad view can help get their attention for individual new purchase or renewal negotiations. In this highly acquisitive environment, there’s another reason to have this info. You might be surprised to learn another incumbent supplier has completed an acquisition and now has a competing offering (to the renewing vendor in question) in its portfolio. For example, a client was recently working on a Splunk transaction. Separately, they had an existing CrowdStrike relationship, which had just acquired Humio – a competitor of Splunk. It wasn’t a perfect alternative, but it revealed a potentially compelling storyline for buy-side negotiations since CrowdStrike was eager to cross-sell Humio into its existing accounts. In other words, it created leverage for the client in both vendor relationships.

Looking for more ways to gain leverage during IT purchase negotiations? NPI’s IT procurement advisors can guide you. Reach out to learn more.