You think you are spending too much on your current software contract, or you need new software now.  You cannot wait for your current software contract to expire or for the economy to pick up. How can you get the best deal from a software vendor? What are some best practices for negotiating or renegotiating software contracts in the current economy? 

 

First, remember that even if you are currently bound by a contract that you really can't afford, you do have leverage with the vendor. The contract will end, eventually, and a smart vendor knows that if he is not willing to work with you when times are hard, you will be less likely to renew at the end of your current contract.  Since the vendor is also affected by the same economic conditions that you are experiencing, he wants to retain his current customers.  The reality is that it is easier and more profitable for him to keep you as his customer than it is for him to go out to find another customer to take your place. 

 

Keep your negotiations as businesslike as possible.  Negotiations do not have to be contentious.  If you explain your needs and current business realities to the vendor in a calm  professional manner, you will be more likely to win his cooperation in structuring a deal with more favorable terms. 

 

Be flexible during negotiations and be realistic about the results you expect.  A vendor is not going to be willing to work with you if there is not any benefit in the deal for him.  If you must have a reduction in the cost of your current contract, the vendor may agree to lower your monthly costs if you agree to a contract extension.  Always shoot for a Win-Win outcome.

 

If your current contract is set to expire in 6 months or less, gather formal bids from other vendors. Make sure that the bids address both the price and the service you can expect from each vendor.  Compare these bids with your current contract.  Then, make a clear, objective decision about whether you are really willing to switch to a new vendor.

 

If you decide that you want to retain your current vendor, use these bids from the other vendors as leverage in your negotiations. If you discover that other vendors are willing to do the same job for a lower price, use their bids to try to convince your current vendor to lower his price for the next contract term.  

 

When negotiating the new contract, try to negotiate some terms that will allow you to further lower the cost if you need to.  For example, you may be able to structure the contract to allow you to reduce or drop support while the contract is in effect should you need to.