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CRM Software Negotiation - Whitepaper (1 of 5)

CRM Software Negotiation Survival Guide

This second version advisory was written by CRM analyst Rob Kane based upon his twenty two years experience
in negotiating CRM software and enterprise software license agreements. The crux of the paper's approach and
recommendations focuses on achieving a fair price and advancing the CRM vendor's cooperation, participation
and vested interest.

With over 12,000 downloads, the original CRM negotiation document has been widely cited in several industry
publications and community web sites as well as commented on by countless readers. This updated version
has been enhanced to include the new software as a service (SAAS) delivery model and the particular
experiences learned thus far from the more popular SAAS CRM vendors. This paper provides no legal advice or representation.

  1. Preperation and Prerequisites
  2. Validate CRM Decision Making Criteria
  3. Become a Preferred Customer
  4. Achieve a Fair CRM Software Price
  5. Lower Risk and Cost with Seasoned Consultants
  6. Caution with CRM Software Customization
  7. Improve Customer Support
  8. CRM Service Level Agreements
  9. Avoid Unexpected Changes
  10. Value Added Contingencies
  11. Summary

Successful CRM negotiation means different things to different people. However, one universal rule is to know what you want before you begin negotiating. Based on my experience over more than two decades in negotiating CRM software and business software pricing and license agreements, I have authored this paper with the following primary negotiation objectives in mind:

  1. Enhancing the Customer Relationship Management vendor's standard software license agreement with provisions that reduce risk and increase the client-vendor relationship and the subsequent likelihood of a successful CRM software implementation and post production environment.
  2. Achieving a fair CRM software price and total cost of ownership.
  3. Eliminating surprises by reaching advance agreement for contingency items or add-ons as part of an evolved solution when considering new modules, enhancements, upgrades and professional services.

Whether enhancing the above objectives or creating your own negotiation goals, it is critical that you determine what is essential versus what is desired and recognize that the ultimate agreement must be a win/win outcome. Negotiation requires compromises on both sides. Recognizing your goals in a prioritized fashion permits you to maintain focus on the items that are the most essential to your CRM objectives.

The second prerequisite is to make sure you are negotiating with a vendor representative empowered to reach a decision; otherwise you're wasting your time, losing your fair positioning and likely dealing in vendor gamesmanship. Verify that vendor personnel in your negotiating discussions have authority to make decisions and commitments before you begin negotiating anything.

CRM negotiation does not infer adversarial positioning. This paper and its recommendations do not support or condone hard-ball or short-sighted shrewd negotiation tactics nor do they tolerate selling gamesmanship for the purpose of one-upmanship with your future business partner. Such accomplishment during the negotiation process is only likely to alienate and divide the client-vendor relationship following the completed sale.

Finally, experienced software technology negotiators share several negotiation characteristics and strategies throughout the negotiation process:

  • Be direct
  • Start early, don't wait until reaching a preferred vendor designation
  • Never get to a lone vendor; only a preferred vendor
  • Have a backup solution standing by or show ability to do nothing
  • Don't negotiate or secure vaporware
  • Exchange concessions for concessions throughout the bargaining period
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The first step is to extend the CRM vendor's software license agreement with supporting documentation which validates the decision making process and subsequently promotes co-dependence and mutual success. If you took the time to create, analyze and score CRM RFP responses (and I certainly hope you did), be sure to append the vendor's software license agreement with the vendor's RFP response as well as any other vendor supplied documentation which you relied upon in making your vendor selection. A word of caution here. Good expectation setting includes alerting the vendors in advance that you intend to append the winning vendor's agreement with their supplied response. This advance notice will not only ensure a higher quality vendor response but will also lower vendor defenses when it comes time to make the vendor supplied documentation liable as truthful.

Major Caution

Major Caution:  While I have tied CRM vendor RFP responses and representation materials to vendor contracts for years with very little resistance, there are some vendors (particularly large and some SaaS vendors) who adamantly refuse to honor this request or be liable for their representation. This evasive response sets off a major red flag and is normally a deal killer for most client organizations. After all, if the vendor cannot rely on their own information, how can the buying client be expected to rely upon it?

In addition to verifying your specific Customer Relationship Management software requirements, it's important to substantiate that the CRM software application will perform as advertised. Almost all CRM software vendors are willing to include verbiage in the license agreement that states the software will materially perform in accordance with the software manuals or help documentation.

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Once the software selection representations have been validated, it's time to append the agreement with provisions that will strengthen cooperation and advance CRM software utilization and success.

Most favored nation (MFN) status (sometimes referred to as 'Preferred Customer') is a key negotiating clause routinely inserted by large companies and experienced negotiators. The premise is to append the software license agreement to give yourself the maximum terms and benefits as offered to any other client organization using the same or comparable solution. Future benefits granted to future clients may stem from vendor promotions (to new or select groups of customers) or superior benefits as negotiated with another organization after the time of your negotiation.

The U.S. federal government made MFN provisions common place with their GSA schedules. In fact, if your CRM software vendor has a GSA schedule with the U.S. government (and most of the more popular vendors do), find out what pricing, terms and benefits are listed on the GSA schedule as these are likely to be the best terms the vendor will ever offer.

Other key provisions to enhance the client-vendor relationship and elevate co-participation for mutual success include the following.

  • Advisory Council Participation - Request to be given a position or seat on any current of future vendor advisory council. Most reputable CRM software vendors maintain customer advisory groups in order to test and validate their product's planning and evolution. Customer advisory groups are very influential in determining what features and functions are added to product upgrades.
  • New Software - Request the right to review, evaluate and optionally purchase new software with discounts. In return for review and evaluation, many clients receive a discount on upgrades or new software.
  • Beta First Right of Refusal - Request to be informed of Beta software, prior to the Beta testing, and have a right of refusal to be included in the Beta test. However, be forewarned that Beta testing requires time, effort and patience. Such efforts may pay dividends though if new software includes capabilities that will benefit your organization.
  • Access to Senior Management - Request access to senior or executive vendor management as a matter of course or at the minimum upon the escalation of unresolved issues. When favors need to be asked or issues remedied, it only makes sense to call upon resources within the organization that can make decisions and commit company resources. Failing to guarantee this access pretty much assures you will never achieve direct access to top decision makers and will always be relegated to underpowered go-between resources.
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