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SHARE: Research before you negotiate for software

Knowing a company's strengths and weaknesses give businesses a competitive edge when negotiating for software.

MINNEAPOLIS -- An expert in negotiation suggests companies take a page from vendors' playbooks and learn as much as possible about the firms that sell them software including everything from the best time of year to get a deal to how salespeople are compensated.

"Knowledge is power for both sides. It's a grounding in negotiating but also what makes each side tick," said Marie Reeve, vice president of Cicala & Associates of Hoboken, N.J., at the SHARE conference this week during a session on software negotiations.

Part of this process of learning what makes software vendors tick starts with understanding the factors that affect its market and the internal pressures the company faces, Reeve said. Is the company publicly traded? Does it face stiff competition?

It's useful to go even deeper to find out what products vendors are under pressure to sell. For example, one vendor can't budge on the price of its hardware but it can give away some software. When does the company close its pipeline for the quarter? Deals can be had if a vendor wants to have another sale under its belt before closing the quarter, Reeve said.

Part of learning about a prospective vendor also entails looking at how its salespeople are compensated. Do they get a fixed salary or just get commissions? Such information is handy to know when evaluating a sales pitch, she said. Another thing to consider is that resellers sometimes are only allowed to sell certain products from a vendor, which may be why sales personnel are pushing certain purchases, she said.

Yet companies should also maintain a good relationship with their sales representative, as that person can be your advocate with their employer. Going over their head or making them look bad to their employer is not constructive.

Such information can be gleamed from trade publications, company annual reports (many of which are available online), SEC filings, colleagues, consultants and user groups. A company can approach this process much like salespeople do when they are putting a prospect list together.

In fact, a good way for negotiators to learn about the how salespeople operate is to talk with their own company's sales staff, Reeve said. Now, technical people don't need to shy away from the negotiations process just because they aren't the ones actually at the table hammering out a deal, Reeve said. In most cases, such people have the first contact with vendors and will offer instincts that could help negotiators down the road, she said.

One thing to consider when negotiating is that cost is not the sole factor for a purchase, Reeve said. "The terms of the contract are by more important. If you're not careful, you'll pay later, a lot more than what you saved on the initial price."

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