ERP Software Negotiation Tips that can Save You a Lot of Money
When negotiating the price of your ERP system, there is an area that you can easily miss.
Most buyers focus on negotiating the cost of the software and consultant time for implementation.
Obviously these ARE two key areas of focus, but in the long run, and really not that long a run, you are going to surpass the money spent on software, hardware and implementation with maintenance and support.
Maintenance and support is usually based on software cost and guess what? … Many ERP suppliers don’t base it on the NEGOTIATED PRICE. They base it on the RETAIL price!
Let’s do the math…
- Negotiated price of your software = $150,000
- Retail price of your software = $200,000
- Maintenance and support agreement is calculated at 15% of $200,000 so…
- Your annual maintenance and support cost = $30,000 per year.
- If it was based on your negotiated cost is would be = $22,500 per year.
- A net difference of $7,500 per year. A lot of money to leave on the table.
- Over a period of seven years your supplier can get your $50,000 negotiated discount back!
Negotiation Tip # 1
Negotiate your maintenance and support cost not on the RETAIL price of the software, but on your NEGOTIATED PRICE.
Negotiation Tip # 2
Another area where you can negotiate the maintenance and support, is in relationship to “When the clock starts ticking”, i.e. when will maintenance and support become billable?
In most implementations Go Live is a moving target. Many times this is due to delays caused by your supplier – Use this to your advantage. Base your agreed upon maintenance and support cost on your Go Live date, not your software installation date.
So this is another area that you might get some negotiating traction.
Remember, timing is everything; if you just lost a round in the negotiation, hit them with one of these tactics. But don’t hit them with both of them at once.
Save these negotiation tactics for when you feel the time is right. If your supplier just “won a round”, their confidence will be high and they might feel obligated to “give” in the art of “give and take” negotiation.
Stay tunred for more sweet negotiating tips…