Boost ROI by Mastering Systems Negotiating and Licensing Practices

During this prolonged period of tight-fisted spending on technology, enterprises are wisely focusing on the process of acquiring IT systems. The bottom-line savings from savvy systems acquisitions negotiations and licensing practices can mean swift and substantial ROI.

Vendors are hungry for business, so it is a buyers’ market for now. Aggressively negotiating and licensing for systems is clearly one of the quickest and easiest ways to improve the value of IT acquisitions, while reducing technology outlays. Enterprises can exploit this period of buyer strength and significantly reduce costs while ensuring successful deployment of new systems or upgrades to existing systems. These results can only come from a wizened approach-the pitfalls of the negotiation process can put the neophyte and veteran IT purchaser at the mercy of aggressive and sometimes predatory sales practices.

Many CIOs feel that trying to understand the terms by which companies obtain software and IT systems is like trying to hit a moving target. Consequently, many CIOs, systems architects, and procurement managers clamor for tools and best practices with which to arm themselves for contract renegotiation; or worse, when acquiring new systems with which they have little experience. While systems procurers say they find it difficult to gain an upper hand while seeking new systems, almost all say that gathering information and pursuing their own terms saved them time, money, and pain throughout the product lifecycle.

Technology buyers have been forced by economics and competitive pressures to become leery of the status quo. They have moved beyond signing a contract without examining and questioning the fine print. Increasingly, users and sellers of technology are becoming long-term partners. Sellers must bring clarity and predictability to their product and service licenses to gain the trust needed to foster long-term relationships.

Enterprise Recommendations

Enterprises are losing money every day due to poor licensing and negotiating techniques. Companies should recognize healthy competition in the IT industry gives them the power to negotiate aggressively. As they seek mastery over negotiating, buyers should work collaboratively within their organizations to centralize buying.

• For buyers, IT systems negotiating is one of the most powerful ways to save money. Because IT purchases account for some 51 percent of enterprise capital spending, well-negotiated terms can save considerable dollars in up-front and recurring costs. Moreover, lessons learned from negotiating one project will translate into further savings on the next project. Soon, an enterprise will gain a reputation as a proven negotiator and IT vendors will approach the buyer with highly competitive terms before time-consuming back-and-forth maneuvering.
• Know a good deal and resist the temptation to extract more. Over doing harsh negotiating by pursuing stringent terms can be counter-productive. Learn to recognize a good value and appreciate the vendor that can make a decent profit on your account. Your vendor should be a partner, so forcing it to break even or even lose money on a project will push the vendor to recover those profits elsewhere-perhaps where the enterprise has less control.
• Create a culture that rewards good internal collaboration. Even in enterprises that embrace decentralized management and organization, separate groups need to work together to negotiate well. For example, engineers should impart their knowledge to purchasing agents, who must communicate with financial analysts, who should understand what line of business managers need. Communication and collaboration among the many internal parties affected by IT purchases and functions is critical to enabling the efficient purchasing of these systems. It is important for enterprises to reward those groups that work well with others, and to identify and remedy those that do not. The biggest hurdle to proper IT systems purchasing is lack of information, so seek ways of making that information flow well.