You don’t know what you don’t know

Over one hundred years ago John Wanamaker, an American merchant and pioneer of many marketing ideas said, “half my advertising budget is wasted, I just don’t know which half”. In the software and software-as-a-service (SaaS) space, a lot of precious IT budget is wasted as most companies over-pay for software and services because they don’t know what market best software deals look like and they don’t know how to get there. Businesses often negotiate blind and hope for the best, which means many end up with sub-optimal deals and waste a lot of money.

I’ve been advising businesses on how to negotiate with software companies for over 25 years now and in that time I’ve seen hundreds of software deals. In my experience, over 80% could be improved, and costs reduced, by optimising market insights and subject matter expertise.

So when you’re next presented with a new proposal or a contract renewal from any of your main software suppliers, ask yourself these two questions:

1/ Do you know how the deal you’ve been presented with compares to market best?

2/ Do you know what tactics other companies used to negotiate those market best deals?

If you negotiate anything without knowing what’s possible then you are just shooting in the dark and will likely under-perform and get a poor result. When it comes to software deals, I’ve seen many businesses expend a great deal of effort targeting the wrong result. Some aim for too low a discount and inevitably end up paying far too much. I’ve also seen some businesses ask for ridiculously high discounts and seen the vendor walk away from the deal. Knowing what market best is means knowing what the pricing/discount targets should be. It requires knowledge of what deals that software vendor has done in the last three months in your geography and with companies of a similar size to yours. If you don’t know what market best looks like, your professional negotiators will be negotiating in the dark.  

Many buyers also think that simply getting a steer on what market best pricing looks like is enough, and that they can then just use their negotiation skills to get those best deals. But demanding great pricing and then getting the software vendor to give it are two very different things. Just banging the table and telling the vendor you’ve heard they give 90% discount won’t achieve anything. They vendor will just say that discount level is just a market rumour and not based on reality. It’s like driving from A to B without a road map; if you don't know what directions to follow, what specific actions you need to take and when, and advice on how to avoid known pitfalls, you will always struggle to get to B.

The magic formula for always getting great software deals and optimising your spend is combining your professional negotiators with external advisers who have vendor specific insight on what market best deals look like and know what other businesses did to get there.

Then you’ll know what you don’t know.