Price is not pricing when it comes to many technology contracts. After you and your team get past the “warmth” of the proposal evaluation, the contract comes. That’s often when things get considerably colder. Here are 3 tips for revealing the real price in complex technology contracts.
Always look past the “price at the pump”, especially with an incumbent vendor.
We’re all busy and want to trust that vendors we’ve worked with previously will price things honorably. Unfortunately, this is not always the case. Software isn’t a tangible, singular item, so the pricing structure for the right to use it varies considerably. The price and discounts listed on vendor websites may seem attractive, but always look out for hidden charges, such as installation and maintenance costs, data transfer charges, and service charges. Take the time to fully review your pricing language and do the math based on your business demand before you agree to the pricing.
Expose and eliminate two key price-impacting terms.
- “Trigger” – many vendors use annual dates within a multi-year agreement as triggers for escalating pricing. These price-impacting terms don’t always jump off the page. So hunt for them carefully.
- “Auto-renewal” – another often overlooked area is whether the term is auto-renewal or evergreen, or a set term of years. Vendors often use auto-renewal to obliterate buyer leverage at renewal time. By the time the vendor provides the increased renewal pricing, the buyer is already committed to the new term (because they missed their window to cancel the auto-renewal). In other words, auto-renewal is often used as a price escalator and/or as leverage in negotiations. The best approach is to choose whichever term makes the most sense based on your needs, but to, in each case, ensure your deal includes year-over-year price protection. This ensures that you’re not on the receiving end of a bait-and-switch, where good prices turn bad at renewal, and the vendor makes back all the savings they ‘gave’ you during negotiations. Make sure you have ongoing price protection, which, combined with an option to terminate (if you choose), gives you optimal flexibility.
Buying is emotional. seek objectivity to protect your priorities.
Evaluating a contract is a critical part of the buying process. But buying is an emotional decision – especially in business. Buying is an action that demonstrates trust. The fact is, most people aren’t as objective as they need to be in evaluating contract language for a purchase that will directly impact their work world. Vendors will likely gather information about your budget limits, how the software will be paid for, which executive will approve the deal, and who makes the final decision. It’s healthy to get fresh eyes from someone whose only stake in your contract is to ensure your priorities are protected.
Hire Experienced Experts To Assist With Your Preparation and Negotiations.
It never hurts to have someone else on your side when making deals with your software vendor. Think about it — software vendors negotiate on a daily basis for their specific products. They are always refining tactics to sell their specific products. This puts you at a disadvantage considering you can’t have this level of focus on just a single vendor. At Software Contract Solutions we help to level the playing field with pricing data and former IT vendor sales and auditing experience. We can help you ask the right questions, compare prices, and get the best deal. We have a deep understanding of the culture within the vendor companies. We understand the way that sales teams are compensated, the metrics on which compensation is based. Our team knows the right path of escalation for specific requests, and how to ensure they will be accepted and approved. We can get your organization the best deal possible. Contact us to learn more.