The article is an extract from Daryl’s recently updated book ‘Negotiating with Microsoft‘.
How to set up the optimal negotiating team
Preparing for a volume licensing agreement with a software vendor is a cross-company project that requires teamwork. If the team does not work together and keep everyone informed, the corporation is likely to close a less than optimal agreement. Procurement and IT, for example, must work together to reach an agreement rather than either department approaching the software vendor without the other.
For example, by expecting the Procurement team to offer a “rubber stamp” to the agreement they organized, the IT team may cause the company to miss out on package offerings. Their focus may be on a specific product and they may not be aware that the product is offered both separately (their interest) and as part of a bundle package (a better offering). Under no circumstances should the IT department open direct channel negotiations with the vendor.
At the same time, there are cases where the Procurement team attempts to negotiate a package without the deep understanding that the IT team has of the corporate software needs and requirements, now and in the near future. In this case as well, an optimal agreement is nearly impossible.
You should compile a recommended list of positions in your organization that will contribute to a successful agreement. For example, an ideal Negotiation Team would consist of members from the following areas:
- Core team: The core group is the team that will meet directly with software vendor representatives. During the entire process, as much as possible, these should be the only people who actually speak with the vendor representatives and certainly should be the only ones authorized to view, respond to, or counter any vendor offering. There should be one leading member, typically someone from Procurement. Other members of the Core Team include, at a minimum, someone from IT and someone from Finance. It might be beneficial to have one or two additional members from any of these departments.
- Support team: The support team should be available to provide any information, research, background information needed by the Core team. This should include legal representatives who are responsible for painstakingly examining each iteration of the agreement (most important are the first and last versions); a representative from R&D who is familiar with what products and versions the R&D department is currently using and perhaps as important, R&D’s future needs; an outside consultant who has extensive experience negotiating with vendor and can help guide, quietly from the outside. In addition, you may choose to add additional members from the same department as the Core team members – another IT person or another Finance person. It is important that some people in the Support team are NOT in the Core team because there may be issues that the vendor will raise and it is best to have a chance to discuss them, rather than offer immediate responses. For example, legal or C-level representatives should not have direct contact with the vendor during direct negotiation discussions. There may be something that from a legal standpoint is not a deal-breaker but the company feels for strategic reasons is important. If the legal department is not represented at the negotiation table, the Core team can easily suggest that this prerequisite comes from the legal department.
- Decision makers: These are the C-level executives that must sign-off on the final agreement. While they should be informed and feel part of the negotiation process, it is important for the vendor to deal directly with the negotiation team and not be able to circumvent the team by dealing with the C-level executives that are likely to be less aware of the nuances in the software vendor’s agreements and what agreeing to a different version may mean to either the budget or the end-users who must use the version. The software vendor may encourage the C-level executives to sign an agreement for a version that has many features that are not needed, or to forego important considerations. On the other side of this, to help prevent the vendor from going around the Core team during the negotiation process, it is critical to have the C-level executives informed of the progress and major negotiation points throughout the process.
Each element of the team plays a critical part in the negotiation process and brings critical information to the team. Only by working together, can the team successfully counter the training, the knowledge, and the maneuverings that are common during the actual negotiations.
Without a clear understanding of how things should work, some IT teams may actually approach and close an agreement with the software vendor, thinking they are acting in the best interests of the company. As the corporate software experts, this might seem like a logical conclusion at first. In these cases, the IT team may even approach the Procurement department only to close the deal they negotiated.
See also ‘How to prepare for a major contract negotiation‘.