Negotiating Keys to Success – Right-Size It!
The most common negotiation blunder is to mess up the license scope and metrics. The best way to protect your interests is for you to take full responsibility for right-sizing your own purchase.
It’s easy to rely on the vendor salesperson to do this for you, but that’s a mistake. Early in my career, my standard approach was to rely on the vendor for license sizing. After all that’s their job, right? With their product knowledge, they should know exactly what is needed and just how much of it is required. – Well, yes and no. Yes, they know their product. Yes, they know the typical license scope and metrics. And yes, they have some information about your intended use, the company requirements, and the potential volumes. But without a good deal of input from you, they’re just ‘guestimating’ the metrics.
The bottom line is you will spend this effort anyway. But if you don’t spend it up front during negotiations, you will spend it later-on deciphering the license you signed and trying to make course corrections after-the-fact.
But perhaps the potential downside is the most compelling reason to take ownership of right-sizing your license. If you rely on the vendor to lead this effort, what are the consequences if they do this job poorly? They may have sold you more than you need, hence their commission is bigger. They may have undersized the user count, so now you have to buy more, which equals more commission dollars. But ultimately, you pay the consequences of a mistake. You alone bear the risk of coming back six months later asking:
- “Why do I have to buy more?”
- “Why didn’t I buy this module in the first place?”
- “Why did we bother with this advanced module when we won’t use it for years?”
- “I don’t need this much anymore. Can I have my money back? Why not?”
Yes the vendor will help you size your license. But they don’t have to face your boss (or Board of Directors) and ask for more money if they come up short. They don’t have to explain how we made a mistake in sizing and scoping the license. They don’t have to convince the boss that they’ve gotten it right this time. No, that’s your job.
Now that I’ve convinced you to take ownership of right-sizing the license, let’s discuss how to accomplish this task. The process of scoping and sizing your license is not altogether difficult; it’s just time consuming. Here’s how I typically proceed:
- Determine the scope and size of the proposed license. Review the proposal or draft license agreement to find the scope, quantity, and/or use restrictions.
- Carefully validate the license scope and metrics. Review feature sheets on each of the products (modules included, excluded, and third party add-ons). Draw a picture of the future state and record assumptions as necessary to fill-in the gaps. Use an org chart or telephone listing to count anticipated users. Compare this against the vendor’s proposal.
- Consider your options. Just because the proposal is structured with modules and users doesn’t mean that you can’t switch to another approach. Carefully evaluate your situation to determine the most appropriate fit.
- Create a baseline comparison. If you’re negotiating with multiple vendors, you need a way to compare the competitive bids on an apples-to-apples bsis.
Contact us today for more samples, templates, and advice for your IT Contract Negotiations!
* * *