I recently had the chance to sit down with Forrester's Duncan Jones, an industry colleague who happens to be an old pro on software negotiation. Based in the UK, Duncan is currently a Principal Analyst at Forrester Research. Yet his recommendations when it comes to saving money with the SAPs and Oracles of the business applications world are clearly universal. If you're a Forrester client and you're looking to save on software negotiations, I'd get to know Duncan, because many of the inner-circle spend tricks of enterprise software license and maintenance savings can't be explained in a quick interview. I'll feature this interview with Duncan in three parts.
Jason: What are the biggest levers in negotiating with enterprise software vendors?
Duncan: The largest levers in negotiation are centered on new money. Large software companies are focused on new orders (which presents immediately recognizable revenue).
Jason: What about maintenance revenue? This is high margin revenue, too, no?
Duncan: Vendor sales reps are not necessarily compensated on maintenance renewals. Moreover, they have no interest in cutting maintenance and have no authority to do this. If you are discussing maintenance with your account executive, from his point of view, you are wasting his time. If you are not interested in buying stuff, he will move on to other accounts where he can sell them something. However, there are some tactics to consider employing.
Jason: How do you broach the cost reduction discussion around maintenance and other areas?
Duncan: The first question to ask is what discretionary projects you might have to spend money on to get the rep interested. The concept is fairly straightforward: "Give us a break on maintenance and we'll give you an option on this project...Get a $50K year cut for $50K in license revenue." This is entirely a question about what he can get through his approval process. You need to recognize that his incentives are different from corporate.
Stay tuned for further discussions and Q/A with Forrester's Duncan Jones.