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Do the Best Negotiators Get the Best Deal?

With over 50 years negotiating with vendors in many countries and watching hundreds of companies negotiate with their software vendors, I’ve never met a negotiator who thinks he/she is a bad negotiator. Of the thousands of software deals I’ve seen, I’ve never met someone who thought they negotiated a bad deal. Yet by definition, there is only one “best”, worldwide! Only one Olympic gold medalist, one silver medalist, one bronze medalist, and thousands of disappointed competitors.

Why do people feel like they got a good deal? How do they know if they got a good deal? What is their measurement of success of a good deal?
When negotiating, you enter the negotiating environment with a position that the vendor wants to charge X and regardless of what they are charging, you want a percentage off of X. Your personal experience will determine what is a bad, fair, average, good, excellent discount. The higher the discount, the better you feel you negotiated and the more you reinforce your perception of your great negotiation skills. A negotiator’s measurement of a good deal is based entirely on the discount from what they paid and the asking price. That is a very bad measurement of a good negotiator and that is why self-described good negotiators frequently get bad deals.

Having lived in Asia the first 20 years of my life, I became very proficient at negotiating with the local vendors, considering there were no published prices on anything at any store. Everything was negotiated. Three years ago when I was with my daughter in the country I grew up in, I found a painting that I had always wanted. The vendor was selling it for $400. With my excellent negotiating skills in that culture utilizing their local language, I successfully negotiated it down to $40. Was I a good negotiator? You can’t answer that until you know what the real cost was. Two weeks later, my daughter was able to get the same painting for $20.

Was the negotiator who got a 90% discount better than the negotiator who got a 50% discount? If your definition of the better negotiator is the person with negotiated the highest discount, then that negotiator just paid 100% more than the other negotiator.

Having analyzed hundreds, if not thousands of software ELAs for over 20 years across hundreds of companies worldwide, it is common to see a “best negotiator” pay too much. Negotiators will never be the best until they stop measuring success by their discount. The Best negotiators measure success as having negotiated a software deal for the same technology at a lower price than their competitor. And like the Olympics, unless you know what your competition’s time is, you’ll never know if you are the best.

About Michael Swanson

Mr. Swanson founded ISAM in 1996 and led it to become an industry leader in Software Asset Management having managed over USD $15 billion dollars in software costs across 1000 companies worldwide. Michael’s team at ISAM has played an integral role in the software asset management industry for over 20 years by: negotiated many of the first software ELAs in the industry; designed IBM’s PRA service; and the first outside consulting company brought in by a major software vendor to assist companies on audits. Clients globally have utilized ISAM’s GreenBook® and expertise to reduce their long-term software expenses by over one billion dollars.