The typical software budget can be reduced by 5-12% through better negotiation and portfolio management techniques. In MGI Research’s experience, 95% of every initiative focused on reducing software spend yields this range of savings – without compromising the business. Rather than working to lower software costs after the fact, MGI recommends taking a proactive approach to improving how the organization negotiates for software, starting with concrete steps executives can take to position their teams for success.

This report details 15 steps every business executive can take to ensure maximum leverage and effectiveness when negotiating a major software investment. Employing these best practices has enabled MGI clients to improve negotiated results by 10-20%+, resulting in significantly better contract terms and conditions, improved vendor relationships, and millions of dollars in net savings.

Select recommendations from the report include:

  • Instead of trying to cut costs after contracts are signed, MGI recommends adopting a “negotiate first” mindset. This means inserting negotiation strategy, tactics, and objectives at the very beginning of the software acquisition cycle.
  • Documenting the financial targets, business objectives, and negotiation tactics upfront improves clarity and strategic decision-making by creating a set of common, agreed-upon negotiation goals for all operations involved in the acquisition cycle (business, IT, procurement, finance, legal, and corporate executives).
  • Consistent vendor evaluation creates favorable negotiation leverage. Our research and deal experience indicate business executives who promote a continuous search for alternative, competitive suppliers consistently achieve better negotiation results – even when there is no vendor change as a result.
  • For vendors that are current suppliers, an annual vendor performance and customer satisfaction review can be a negotiation tool, especially if the supplier fell short of meeting target performance metrics.
  • Maintaining healthy, positive working relationships with vendors, partners, and suppliers is paramount for an effective negotiation strategy. However, the vendor relationship must be established throughout the vendor’s entire company hierarchy – not limited to the sales department.

MGI Research analysts have helped clients negotiate over $1 billion in software deals. Clients should reach out to MGI Research for objective input, benchmarks, and negotiation assistance here, by emailing info@mgiresearch.com, or calling +1 (888) 801-3644.