Top tips for purchasing software from the best negotiation experts
When you consider your SaaS buying and renewals process, does it make you feel a little... apprehensive?
If the thought of going to the negotiating table makes your pulse quicken, you're not alone. Purchasing software is a complex process. You may feel unsure of options, or if an existing product still meets your needs. Add to this that pricing is notoriously subjective, and it's enough to make anyone put their guard up.
Before you strap on the goalie pads for your next renewal meeting, we'd like to offer some helpful insight. With a transparent approach, team mindset, thoughtful planning, and good data, purchasing software can feel easier (for you and your sales rep).
Here are some of the best tips we've read from expert negotiators you can apply in your software buying process.
Take a teamwork approach to the SaaS buying process
Love is a battlefield, but negotiating contracts doesn’t have to be. While SaaS buying negotiations invoke a sense of competition, in reality, you and your sales rep both want the same outcome. In fact, that sense of deal-blindness might go both ways. It helps to acknowledge this fact, and begin negotiation with a collaborative approach.
Each side has clear objectives during the software buying process, but they aren’t at odds. You want a fair deal that gets you the functionality you need without breaking the budget. Your sales rep wants to get you what you need without "taking a beating" on the numbers.
Sure, your rep wants the sale. They also want to create solid relationships that land repeat business and referrals.
In “Getting to Yes,” negotiating expert Roger Fisher and co-author William Ury point out positional bargaining - in which each party puts its flag in the ground and negotiates by concession - isn’t as effective as collaboration.
“The ability to see the situation as the other side sees it, as difficult as it may be, is one of the most important skills a negotiator can possess.”
By treating the SaaS buying process as a partnership, everyone wins.
Get your software purchasing deal-breakers out in front
There’s no sense trying to push the deal-breakers off until the last mile. Instead, start SaaS buying talks by addressing the elephants in the room.
As Douglas Stone, author of “Difficult Conversations” puts it, “Working to keep negative information out during a difficult conversation is like trying to swim without getting wet.”
Instead of avoiding the deal-breakers or requirements, lay them out upfront. Once you get major issues ironed out, you can continue negotiating without concern about what’s hiding in the shadows.
Three big areas to discuss upfront:
- Security requirements: Beyond the basics — secure encryption and storage — consider protections like breach reporting, data deletion, and other advanced protections.
- Budget: If you have a budget constraint, it’s best to share that early. This allows your rep to do the groundwork and get a number that works for both sides. If the budget is too far out of alignment, you’ll know before the negotiations get too far down the road.
- Functionality: You know your business case and the functionality you need to get your job done. Discussing these requirements upfront means you can assess the offering on its merits.
Manage software contracts proactively
When you wait until the last minute to purchase software, you lose leverage. Negotiation and analysis take time and attention. Running up against the cancellation window leaves those items in short supply.
In a recent interview with Reddit's Procurement leader, Omar Ghani, he explained how, “The first is the challenge of deadlines. If a renewal is due two weeks from today, you've already lost a lot of negotiation leverage.”
Get a handle on the renewal schedule of your contracts. Give yourself a 90-day runway so you can evaluate your needs stress-free. This will allow you to take advantage of our next pro-tip: right-sizing your purchase.
Optimize data and process when purchasing software
Poor visibility and last-minute negotiating can lead to one-size-fits-all licensing purchases. While going best-and-biggest saves time, it’s not always cost-effective. Unless you intend to use the full features across every license, you're probably overbuying. With waste on the rise, it pays to give this aspect of the buying process extra attention.
Knowing how to right-size your SaaS buying requires some visibility into current use. This is where a comprehensive view of your tech stack can help optimize your software buying process to save money.
To do this, you need to do the groundwork up front.
“Prepare, prepare, prepare,” advises Chris Voss, former FBI negotiator and author of “Never Split the Difference.”
“When the pressure is on, you don’t rise to the occasion; you fall to your highest level of preparation. So design an ambitious but legitimate goal and then game out the labels, calibrated questions, and responses you’ll use to get there. That way, once you’re at the bargaining table, you won’t have to wing it.”
This preparation can also save you money. By knowing what you have today, and how you use it, you can ensure you’re purchasing only what you actually need. When you manage SaaS contracts proactively, you'll avoid unused licenses that can account for up to 30% in SaaS waste.
Compare suppliers in the software buying process - then commit
Three bids and a buy. That's how we believe everyone should buy SaaS: look into three products, get preliminary contract details in place, and then choose one to purchase.
One point to consider when comparing prices is the cost and time investment of migration. Changing vendors incurs security and legal vetting, setup, and downtime. When deciding whether a competitor can better serve your needs, be sure to factor these in.
In “Getting to Yes,” Roger Fisher and co-author William Ury propose the idea of the BATNA - the “Best Alternative to Negotiated Agreement” - as a principle to exploring other options. It puts the power of negotiation in your corner and avoids the scarcity mindset that can often lead to less-favorable deals in the end.
If you’ve explored your options and determined one supplier as the best option, don’t be afraid to commit.
In William Ury’s follow-up book “Getting Past No,” Ury surfaces the power of commitment in forging better deals with your chosen vendor.
“For every ounce of power you use, you need to add an ounce of conciliation.”
This conciliation might come in the form of an advantageous contract term for your supplier.
The upside? Adding years to the standard one-year term can result in more leverage in pricing. A sales rep who knows they can rely on your business may offer you better terms and more attractive prices. In an increasing climate of competition and churn, pipeline stability is gold.
This goes back to the idea of cooperative negotiation. You’re offering something extremely valuable to your rep: deal stability. In turn, they can offer competitive pricing and terms throughout the relationship.
Using the advice of expert negotiators Roger Fisher, William Ury, Douglas Stone, Omar Ghani, and Chris Voss, you'll enter every software purchase with a new level of confidence and composure.