Monday, December 01, 2008

Negotiating enterprise software deals in Q4

Ray Wang and Vinnie Mirchandani each have good posts this morning on negotiating software deals. Ray focuses on recommended buyer tactics in the current economic environment. Vinnie does a rerun of what he calls his "Top 10 Stupid Salespeople Tricks."

From Ray,
In both the enterprise and SMB space, recent market conditions point to a lack of available financing for enterprise software purchases. This trend will continue as the credit markets tighten. The result - vendors will be more inclined to discount. Enterprises engaged in contact negotiation with software vendors should take this opportunity to seek additional discounts as the scarcity of new deals will put customers in the driver seat.
Ray continues with five tips for buyers.

Vinnie's "stupid salespeople tricks" include "We want to be a partner, not a vendor," "One of us does not belong," and ""You are trying to commoditize us." Read his whole post for the full list of ten.

Both take a shot at revenue recognition as a vendor excuse. I covered the revenue recognition issues in my previous post. Although I believe revenue recognition is a legitimate issue, Ray encourages buyers to push back when vendors claim it hinders their flexibility:
Have the vendor demonstrate the range of discounts as they apply to their VSOE rules. Often times, the sales person is confused about how these rev recognition rules impact the deal and will “hide” behind these rulings. Breaking down the revenue recognition components often identifies hidden opportunities. Keep in mind there are some limits.
Vinnie agrees that most salespeople don't understand the accounting standards and therefore hide behind them. He writes,
A client CFO challenged a software salesman and asked to speak to his Controller about a so-called recognition issue. The issue magically disappeared soon after. We agreed it probably was a "commission recognition" issue rather than a revenue recognition issue.
Regarding the current economic climate, my own observation is that there are still quite a few organizations out there planning to buy software, at least here in Southern California. A local SAP SMB reseller told me last week that he has never been busier, believe it or not. But most deals have already slowed to a crawl. Buyers that are able to move forward, however, will find themselves in the driver's seat when it comes time to negotiate.

Related posts
Why vendors resist negotiating software maintenance fees

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