The art of negotiating software vendor contracts

CISOs looking to spice up their New Year’s resolution list can do so by considering a goal of attaining Shark Tank-level negotiation skills that can be leveraged during their next meeting with a software vendor.

Software vendor prices are on the rise. According to a July Forrester report, 79% of US organizations saw an increase in software costs in the last year.

And while the ability to negotiate during the establishment of these deals is more critical than ever, Alex Sharpe, principal at Sharpe Consulting, told IT Brew that a number of CISOs have room to improve when it comes to working out agreements with vendors.

“They tend to lean very heavily towards the technical aspect,” Sharpe said. “They’re important, but they really don’t matter when it comes to negotiation.”

Software spree. Fortunately, there are a number of tricks CISOs operating without a formal procurement team can leverage when walking into their next deal. Sharpe told IT Brew that CISOs should remember that the ball is in their court when making an initial deal.

“When you’re making that initial deal, you have all the leverage in the world,” Sharpe said. “The sales person wants to do this deal [and] as you get closer to the end of the quarter, they’re going to need it.”

He advises IT leaders to “think multiple years ahead” when securing the initial deals by pre-negotiating the cost associated with buying additional licenses.

“They usually have this stuff pre-negotiated. They have it in their pricing books, but they’re not going to show you,” Sharpe said. “They’re not going to show it to you until you push them. So push them on it.”

Sharpe told IT Brew that CISOs can also keep future price hikes at bay by requesting that future price adjustments never exceed the historical inflation rate in their contracts. He added that in the case that a CISO is unable to negotiate better deals for the licenses themselves, they can attempt to push for amenities from the vendors.

“It could be training. It could be technical support,” Sharpe said. “It also can be [having] them donate some professional services hours.”

Other hacks. For CISOs looking to negotiate at the time of a contract renewal, Yashin Manraj, CEO of cloud native platform Pvotal Technologies, advises them to not be afraid to “vendor hop.” He also recommends that IT leaders shouldn’t be closed off to working with young vendors and startups to supply software.

“They will go above and beyond to make you happy customers, especially if they don’t have as many,” Manraj said. “So, I recommend that when they are negotiating.”

He also reminds CISOs that one of their greatest superpowers when negotiating is the ability to walk away from a deal, even if they feel an emotional bond with a salesperson.

“All these sales agents…are trained to be very good, to be gregarious, to be able to socialize with you,” Manraj said. “And so their attitude is not a reflection of their general behavior…They’re trying to make a sale.”