Tuesday, October 19, 2004

How not to buy software

A software salesperson wrote to me today, with an interesting question. This sales rep, who works for a major Tier I vendor that will remain unnamed, is trying sell to a prospect that is, let's say, acting a bit aggressive toward potential vendors.

Frank, I would like your input on what you think about a potential client. This prospect first ran software suppliers through an extensive custom demonstration, detailed RFP response, and sales presentations. The prospect then made some first-round cuts to get to a short list and is now going into a reverse auction process in which they are introducing some new suppliers. This is a major multi billion dollar company.

Mind you--we have been respecting the prospect’s process and rules, and now they pull this. It makes me wonder how the software industry will ever stay in business.

This prospect has also stated how important it is to build a strategic relationship. Also, the software solution isn't a simple straightforward application that anyone can do. In other words, it's not a commodity.

Your thoughts? Have you run into companies buying software like this lately?
To be honest, I've never seen a company attempt to buy software like this. But let's turn it around and ask readers. If you're a software buyer, would you use a process like this? If you're a software vendor, what would you do in this situation? Click on the Read/Post Comment link below, or send me an email with your thoughts.

Related posts
The dark side of reverse auctions


Cashcow said...

Pardon the repeating an age old expression: Buyers are liers. Just as software sales guy/gal is presumed to be lying when their lips are moving.

I think deals are won and lost on three critical factors: 1) Knowing your audience. 2) The buyer must trust you. 3) The buyer must like you enough to face you for 5 years of ownership.

We, the vendors, have jaded the entire buying community to the point where they feel it is open season on the vendor. I've made much money in this business, and have watched the 30-50% churn of new reps every year.

Bottom line for survival and making lots of $: Love what you do, be knowledgeable and confident in what you are selling, use references to tell your story (because you are presumed to be a liar), know your limits and be firm with your processes. If you let them walk on you now, the pain is only beginning if you do sell the deal. Challenge the buyer if they go back on their word and build in a mechanism in your proposal to raise price or decrease scope if they back out of their commitments regarding agreed to sales cycle process or timing.

The Cynic said...

I have seen this twice before with non-ERP software implementations, at least in the initial stages. I have never seen how it has turned out (i.e. how the final bidding worked). However, the sales person mentioned makes a very good point in that ERP is NOT a commidity. In fact, it is the total opposite. If it were a commodity and easy to bid on, we wouldn't see so many failed attempts at implementation. Introducing this kind process will no doubt have a negative effect on the way this project is approached by the vendor. I cannot imagine how they will be able to account for the inevitable changes that will be required when the bidding process will no doubt remove any margin of error. I also doubt that a fat support contract will be accepted to make up for any losses due to the bidding process.

I don't see this as a horrible thing for the software/solution provider as much as I do for the company attempting this type of procurement process. This model sets the wrong tone, creates a weak relationship with the provider and ultimately puts the entire project in jeopardy before they even break the shrink wrap on the disks.

Frank Scavo said...

Good points from both Cashcow and David. The sales rep that posted the original query somewhat agrees with you both.