Friday, June 13, 2008

Negotiating in the IT World

Purchasing software is quite an ordeal, especially ERP software. Here are a few tips and notes from some very recent first hand experience.

  1. ERP software vendors are no better than second hand car salesmen. Listen well but make sure that you get any promises in writing or at least confirmation via e-mail. This has just saved me $45,000 and certain embarrassment. During the negotiation period they will promise everything and often state that "that functionality is standard". Be certain to check everything as often things don't add up when you get to sign the contract.
  2. The RFP and negotiating always takes months. Find out when each of the ERP vendor's financial year end is. Aim to sign the final deal within a few weeks of this date. They will throw in the CEO's grandmother for free, if it means making target.
  3. Plan your capacity with care. It often does not pay to purchase double the required licenses now at a great discounted price if you are not going to hit the numbers for quite some time.
  4. A large portion of a major ERP project requires no software so do not buy the software up front as it will sit on your desk starring at you while your annual license fees for a gazillion concurrent users remains unused. So when you do go live you suddenly find yourself having to pay the annual fee again a few days later. Use a test environment until you really have to install the live one.
  5. When one of the ERP vendors comes to visit during the negotiation stages always subtly remind them that this is a competition. For example when Oracle comes to visit make sure the pen you remove from your top pocket to make notes is from SAP. Don't show the SAP people out of the lobby with the Oracle bunch waiting for you. This may sound effective but they all know each other and you don't want them to start talking to each other.

Above all else, as mentioned in one of my other blogs, DO NOT believe all the white papers. Do your homework diligently and if you are offered site visits try and do them without vendor presence as you can really get some honest answers.

- Paul Steynberg

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