While advising a CIO during his recent ERP software selection and negotiation process, I heard a common complaint – that the big vendors consistently make it very difficult for clients to trust them. This CIO’s biggest complaint stemmed from vendors’ unwillingness to provide the transparency he requested and required. Specifically, he felt very uncomfortable and upset that the software vendors continually denied his requests to see the underlying list prices for the products he wanted to purchase – and would likely need to purchase again in the future.
Eventually, with the proper strategy, approach and messaging at the right executive levels, the CIO was able to overcome this issue, but the fact that it took so much time and effort is still weighing on his mind.
You often hear that transparency is a cornerstone in building and maintaining trust in relationships. That’s true of both personal and business relationships – including those between IT organizations and their chosen software vendors. As we discussed in a recent post about the value of trust, creating transparency is one of the best practices for building trust. So how can a software vendor create transparency in ways that strengthen long-term relationships with clients?
The first thing they should do is provide clients with a complete copy of their price books. That way, clients can clearly identify the list prices and license metrics for all usage-based modules and user groups. To Oracle’s credit, they make it quite easy to obtain underlying list prices of their portfolio of products as they post them on their website for all to see. Unfortunately, Oracle is the exception to the rule. And while it’s good that Oracle provides this information, it is important to add that Oracle regularly promotes “custom bundles” and client-specific configurations, which largely defeat the purpose of sharing list prices in the first place. It is difficult, if not impossible, to determine and validate the list prices associated with a custom quote because the products depicted in the custom quote do not match the portfolio of products as it appears on Oracle’s website.
Without complete transparency into the underlying list prices of the software they are purchasing, companies have no way to validate the discounts they are offered. Also, the value of any negotiated go-forward discount protections are significantly diminished without such transparency. Without baseline price lists, organizations that need to purchase additional software (as they inevitably will), can have no idea if the vendor actually increased prices, which would effectively reduce the discount on net license fees.
Whether organizations are evaluating potential new software vendors or have existing relationships with one or more vendors, it is critical that they receive clear, complete and accurate price lists. If and when software vendors challenge or resist such requests, clients should remind them of the important role transparency plays in strong, mutually beneficial relationships.
Similarly, software vendors should be reminded that pricing transparency allows clients (who are after all paying the bills) to plan and budget for additional growth. In that way, full disclosure can streamline funding approval for future purchases, which is of course good for vendors. That is precisely what we mean when we say that having access to the software vendors’ list prices is the first step in ensuring win-win relationships built on trust.