Mike Austin breaks down four software negotiation styles on an effort-vs-result grid. Unengaged buyers overpay by 30-40%, while those who bring in experts avoid overpaying and often land better deals than expected.
Questions this video answers
Mike Austin (SAM Channel)
Unengaged Buyer; Go-It-Alone / "Not my role" purchaser; Overwhelmed Lone Wolf; Expert who leverages teams or third parties.
Approximately 30–40% more than necessary.
Approximately 20–30% more than necessary.
Approximately 10–20% more than necessary.
Chapters
Hi there. Mike Osterin from the SAM Channel. In today's episode, I'm going to talk to you about four types of negotiators or four different negotiation styles that I see people use when it comes to working on software contracts or software renewals. I've put together a diagram that sort of explains what I'm going to talk about today, but really I want to focus on where we see people getting the most roi, why and how that is. So if you think about the graph that we're showing on the screen here, you got your typical X, Y axis with the left hand side being the amount of effort spent, the least amount of effort, the right hand side being the most amount of effort, and the bottom being the lowest results or the worst outcome when it comes to negotiating a deal, and the top being the best outcome. So I'm going to start in the bottom left quadrant and talk about that type of a negotiation. So this is somebody that spends very little effort and gets, you know, kind of not the greatest results. In fact, what we see down in here in this quadrant are people that more or less usually pay less price or maybe get a couple of percentage points of discount. Now why is that? This is typically a negotiator that does not like to negotiate. So a lot of the times, for instance, software contracts are negotiated within the IT department. And if you're an IT director that does not like the game of negotiations, the game of sales, and just thinks that it's a yucky process, so to speak, you're probably going to find yourself here. You're going to take what the vendor tells you or what your partner or your reseller tells you. You're going to accept the quantities that they tell you to buy, you're going to accept the bundles that they tell you to buy. And you're not going to put a lot of effort into actually understanding what you're buying. Because software licensing, to do it well, you really need to put a lot of effort into understanding what you're buying. And so these people, because they do not like to negotiate, tend to get the worst deals. And we see quite a number of people that fall here, very little effort put into it and they don't get great results. We would actually call this the unengaged buyer. Right. And not to insult anybody that's there. I totally understand if that's not your role. Your role is not to negotiate. You don't like it. It's, you know, something that is not within your comfort zone. I understand why this happens and why you're there. So now if I bounce to the bottom right quadrant, the go it alone. It's not really my role type of negotiator. An example here would be potentially say a purchasing person that's tasked with negotiating a complex, let's say Microsoft EA renewal. Right. It's not in their wheelhouse. Right. They don't necessarily understand Microsoft technology. They don't understand all the ins and outs of licensing. They don't understand how all the different licensing types play. So they will go out and spend a lot of time on their own sort of trying to educate themselves. But there's only so much that you can get when you're trying to educate yourself. Right. So if you go in the public domain, there's not a lot of information on how an EA works, how a bundle work, how do you look at inventory and try and figure out how that correlates to my licenses. In fact, you would probably look at it in very high level, just go, well, we have, you know, 5,000 employees or 500 employees, so I'll buy 500 user licenses or 5,000 user licenses, whatever it may be. So you're going to use sort of very generic data instead of deep domain expertise here. So they may do a little bit better than the their counterpart over on the bottom left over here. But they're still not getting the best deal because they haven't put together all of the data that's needed in order to really sort of look at these things and figuring it figure it out. And it's just that they don't have that's. It's not that they don't have that skill set, it's just that it's outside of their domain expertise. You know, just to solidify on that, it would be sort of like asking me to go do open heart surgery. So let's go up to the top and talk about the overwhelmed lone wolf type. What's the overwhelmed lone wolf? He's probably gonna go a little bit deeper than their cohort down below in the bottom right quadrant. And what I mean by that is this is probably an IT person that's been tasked with it. So they might go out and start pulling some reports and pulling some data together and doing all this research. But again, they don' necessarily have the expertise to know exactly what they should be pulling. So they might pull user reports, but not know how to properly cleanse a user report. So if I'm doing something that's based on users, they may go out and pull active directory user reports which are Inflated and they don't know exactly how to actually analyze that data, particularly as it comes to licensing. So they end up over subscribing. Right. But because they have a little bit more data, they're usually able to negotiate a little bit better discount than their lower right quadrant counterpart and better definitely than their lower left quadrant. So from an overall perspective, they do okay. But, you know, there's definitely room for improvement. Now let's go talk about our friend up in the upper left quadrant. The person who spends not a lot of effort on this but gets great results. How are they able to do that? They leverage expertise, they pull teams together typically. And so they know where their strengths are and where their weaknesses are. So if they don't bring in, say outsource that to a firm like Metrics Data or others, what they're doing is they're pulling expertise in, in house. So they might be an IT person that pulls in a procurement person that likes the game in negotiation. They may pull in a legal counterpart that actually understands and can look at the contractual language. They may pull in a finance counterpart to build some models. So this is somebody that builds expertise around them, either in house or third party, in order to get the best results. And so what they do is they rely on that team to provide the expertise in their area in order to get the best deal and to get the most data. And when you have all the data that you need, that's how you get the best deal against any software publisher out there. And that's why these people that are up in this upper left hand quadrant do the best when it comes to negotiating deals with software vendors. So if I was to summarize this, what do we actually see? How does that come down to dollars? What does this cost to me? If you're the sort of unengaged type, you're probably paying anywhere between 30 and 40% more than you need to for software. If you're the sort of, it's not my role, but I'm going to do it. Type on the bottom right hand side, say 20 to 30% more than you need to. The sort of lone wolf overwhelm. 10 to 20%. People up in the upper left are rarely spending more than they need to. In fact, a lot of the times they get better deals than the vendors themselves ever expected to give to a client. If you'd like to be like our expert over here that's paying less for their software than the vendors want them to be paying, go ahead and click the link down below and you can get in touch with us, and we'd be happy to have a conversation about how we could help. Thanks for watching this episode. I hope you found it informative. I'm Mike Austin, and until next time, keep keep your software safe and your assets managed.
