Redmond Negotiator

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
• 05/25/2005

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 it.

• 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 of Office.
• 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 by “corporate.”
• 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!