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Snag a better software service contract with these tactics

Negotiating a cheaper service and support agreement for software requires some ingenuity, but there are typically savings to be had if you follow these strategies.

As every administrator knows, as costly as they may be, you can't go without a software service contract. But there...

are ways to knock the price down.

If your organization purchases all its software licenses through the vendor that made the software, then the support options are somewhat limited. Software vendors might have one or two -- possibly even three -- support options, but there isn't usually a way to negotiate a custom support plan when you buy direct.

This isn't to say the business should not try to get better terms, but software vendors do not typically negotiate on the types of support. Hence, the only avenue for compromise is on price.

Understand where you have leverage

Negotiating the price of a support and software service contract is a common practice. Few enterprise software vendors list license or support prices because the cost is typically based on the number of licenses to be purchased. Support costs are usually figured into the sales quote.

When purchasing software directly from the software vendor -- and the vendor does not publicly disclose pricing -- then there is room to haggle. Never take the vendor's first quote. Much like dealing with a car salesperson, it's almost always possible to get a better price if you push for it.

The software vendor's goal is to make money. The more it stands to get, the better your position is to work a less costly deal. Suppose you get a quote for three licenses, plus one year of service. It might be possible to talk the price down a little bit, but the vendor has no motivation to give a price break on such a small order. But, on an order for 3,000 licenses, the vendor stands to make a lot of money and will most likely make accommodations to get your business.

Some wiggle room with small orders

What can you do to negotiate the cost of a software service contract on a relatively minor order?

Try asking the vendor to throw in the service contract for free; explain that the small number of licenses means you won't tie up their phone lines. You might also add that you will probably never use the support, but your boss insists that you have an agreement as a safety net.

You could say that the service cost pushes the software beyond your budget, and that, without a more favorable agreement, you will have no choice but to find a less expensive -- possibly open source -- product.

You still aren't likely to get a free support agreement, but if the vendor understands the deal hinges on the support contract, then they will probably give a discount at the very least.

Get a break with an advance purchase

Another way to negotiate on the service contract is to purchase multiple years of support. If the company plans to use the software for an extended period of time, then it would probably pay for a support contract each year anyway. Why not pay for three to five years of support up front in exchange for a deeply discounted price?

If you purchase software from a value-added reseller rather than the software vendor, then these techniques might still be viable. You may be able to negotiate the scope of the service contract.

For example, one company I worked for had an agreement with a reseller that the company would purchase all software through the reseller -- that included OS licenses, application licenses and everything else -- but expected 24/7, on-site technical support for that software. This service contract was expensive, but the company lowered the price by agreeing to handle Tier I support events internally. The company's IT staff -- many who had various IT certifications -- would handle whatever support incidents they could. For issues that proved more troublesome, the company would call the reseller for support.

Even with primary support handled by the organization's IT staff, the support agreement was still expensive. The most important thing this organization did was keep careful records of all support incidents. When it was time to renegotiate the support contract at the end of the first year, the company used those reports to show it had only asked for support on a certain number of occasions. Those records gave the company leverage to get a better price than it had paid for the previous year's support contract.

This was last published in December 2017

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