Countdown to Your New Microsoft Deal, Part III: Bring an Extra Shoe to the Office
This month: Wrapping up your deal—final negotiation and contract tips, and implementing for success.
- By Scott Braden
When you read this it’ll be about a month until June 30—which is
fiscal year-end for Microsoft. If you’ve been around vendors much, you
know what that means: “Let’s make a deal.” So this month’s
column is all about the nitty-gritty of making a deal with Microsoft.
But first, a little history lesson: Remember Nikita Khrushchev? He was the
Soviet premier from 1958 to 1964. Khrushchev gave the order to build the Berlin
Wall, sent missiles to Cuba (causing the Cuban Missile Crisis) and presided
over the launch of Sputnik.
Khrushchev is also famous for banging his shoe on the table at the United Nations
to emphasize a point. But one photo of the famous shoe-banging incident taken
from a different angle clearly shows both of his shoes on his feet—meaning
he had planned the whole episode!
Let’s try to learn from Nikita. Even though he was described as a “boorish,
uncivilized peasant” and had a reputation for interrupting speakers to
insult them, his “Soviet style” of negotiating is still studied
today—and can be very effective.
Phase 6: Negotiating
Have you set specific goals for your deal outcome? Things like “We have
determined that we want Software Assurance coverage for the next three years
for products A, B, C, but not for products D, E, F. And we have received initial
price quotations from the resellers and/or Microsoft so we know the benchmark
prices to beat.”
Have you identified your sources of negotiating leverage? Here’s a list
to prompt you:
Time: Your current contract may be expiring soon, and of course if you let
your SA coverage lapse, then you have to start all over again to re-enroll.
Here’s a tip: If you’re up against a contract deadline, ask for
an extension of your current contract. Microsoft also has time pressure—quota.
June 30 and Dec. 31 are the end dates for Microsoft’s quota periods. If
you’re ready to cut a deal, early June and December are the times to do
- Knowledge: Of competing alternatives (open source, other vendors/solutions,
“do nothing”), and of what’s possible to get: concessions
on price, terms, structure, payment plans, extra benefits.
- Competition/Choice/Alternatives: Linux/open source, IBM, Sun, Oracle,
Lotus, Novell, thin client, staying on Exchange 5.5, choosing Word only instead
- Legitimacy: Being “in the right” or being “a good
long-term Microsoft customer.” Gather your company’s Microsoft
spending totals from the last few years. Pay attention to maintenance you’ve
paid for where no version upgrades were released during your coverage.
- Commitment: You have a contract deadline, your Microsoft rep has
a quota deadline. How much time can you invest in this negotiation? How firm
is your company’s commitment to getting the best deal (e.g., how far
will the boss back you up?)
- Risk-Taking: What’s risky about negotiating with Microsoft?
How about … AUDITS! These days, as long as you’re negotiating
in good faith with Microsoft, your chance of being audited (by Microsoft)
is low. If you’re worried about the possibility of an audit, you'll
soon be able to download a five-page report on software compliance audits
from my site here
(this report will go live in the evening of 5/25). Risk-taking could also
apply when you’re thinking about alternatives to Microsoft—Linux
is not without risk (your Microsoft rep will be happy to tell you about intellectual
property risks associated with open source). But then, Windows is not a risk-free
choice, either (viruses, anyone?). The key is to identify and assess your
risks so you know how to make trade-offs among alternatives.
- Effort/Work: Is your team able to do the reporting, gathering history,
analyzing, planning, talking to reps, understanding the roadmap? If not, you
will be at a disadvantage. You can assume that your Microsoft rep works very
hard and will not shirk a chance to make money.
- Money: Your ability to spend has very little bearing on the quality
of the deal you negotiate. Your contract negotiation outcomes are more closely
tied to your goals, your power, your alternatives, than to your ability to
pay. If you have no money but are committed to a Microsoft platform, you can
get creative financing.
- Negotiating Skills: The “sitting across the table” skills,
things like “the flinch,” “the crunch,” “give-backs
and take-aways.” There are dozens, maybe hundreds of these techniques.
If you’re not strong in these areas, your options are to structure the
negotiations via e-mail and planned phone meetings so you don’t have
to react “in the moment.” But it never hurts to have someone who
has the poker face and the demeanor to get the deal done at crunch time. If
you need to brush up, I recommend any book
or training course by Dr. Chester Karrass (by the way, that’s the
course your Microsoft rep took).
What sort of tactics can you expect Microsoft to use?
- Time: Almost every customer I’ve ever worked with has complained
about how long it takes to negotiate with Microsoft. Do you think that’s
an accident? If you do, go back and review that list of sources of negotiating
leverage—“time” is one of the keys, and Microsoft uses it
well. You should expect delays in answers to every request, question, clarification
and contract change. Plan for a lot of follow-up work.
- Org Chart: The key players in your deal are: your Microsoft rep,
the general manager of the local office, and possibly a Microsoft Licensing
Executive. Depending on the size of your deal, a vice president may also be
involved. Naturally, this means you can get shunted around to various people
to “review” your terms, and offer their input and recommendations.
Keep in mind: Your rep and GM are the people carrying the quota, so if you
can convince them to support your terms, they will help get the deal approved
- Over Your Head: Remember
my first column when I told you to communicate with your senior executives?
Here’s why: When your Microsoft VP sees that the deal isn’t going
the way they like, your CIO, CFO or CEO may receive an invitation to dinner
at the Gates mansion. What do you think will get discussed at that dinner
and on the corporate jet?
- Knowledge: If your company is large and complex—especially
if you have more than 5,000 PCs—you may have a dedicated Microsoft account
team. So these folks spend all day, every day, talking to people scattered
throughout your company. What are the chances that they know more about the
planned and unplanned projects, priorities and politics than you do? That’s
why you’re treating this as a cross-departmental team project, right?
Have I given you enough to go on? Send me feedback at [email protected]
And remember to bring that extra shoe to the office!
Scott Braden has helped more than 600 companies negotiate Microsoft volume
license deals. For a free case study, "How a Mid-size Company Saved over
$870,000 on a $3 million Microsoft Enterprise Agreement, in Less Than Three
Weeks," visit www.MicrosoftCaseStudy.com.