Agree a Price
Price is likely to be the first negotiating point since there is no point in getting into other contractual details if your preferred solution isn’t within your agreed budget.
To get the best possible deal for your organisation you need to understand where the supplier has the most flexibility to negotiate. Generally this is in the area of licence fees. The price quoted for a piece of software is likely to be composed of:
software licences
maintenance and support costs
implementation consultancy
and, possibly, hardware if ordered from a single supplier
It may be difficult for a supplier to reduce consultancy costs as they have overheads associated with real people whose salaries must be paid. The cost of producing software is, however, in the development. The cost to the supplier of giving you a software licence for a developed product is little more than the price of the CD on which the application is loaded. Your strongest negotiating position is therefore to ask for a reduction in licence fees or more licences for the price quoted. The supplier may agree to move on maintenance costs or at least to cap them for a fixed period.
A favourite tactic of suppliers who know they are exceeding your budget is to reduce the hardware costs. They do this by reducing the specification of the hardware. This looks good on paper but can lead to huge problems a few months down the line when you realise the hardware is inadequate for your purposes. Not only do you need to meet the added expense of purchasing new hardware but you also face major disruption to services whilst you undertake the upgrade. If a salesman some way into the negotiations suddenly realises 'you don't really need all of that hardware' be very wary and take independent advice on the hardware sizing (this is sound advice in any case). Even if they are more candid and suggest 'you can't afford this now so get the minimum and phase more in out of next year's budget' - you should still be wary. It is very false economy to skimp on hardware just to get the project off the ground.
In agreeing the deal it is important to be absolutely sure that the licences you are purchasing are adequate for the scope of the project you are undertaking. Where possible it is always best to obtain a site licence for the products. A price per named user will inevitably work out most expensive. A price per concurrent user may be better provided you have done the metrics correctly and provided your user activity is spread over time rather than concentrated in intensive processing periods.
