What to Look Out for When Negotiating with ERP Providers like Oracle & SAP

Do you know how to protect yourself and stay in the driver’s seat during contract negotiations so that you won’t be held ransom by your ERP provider?

In this article, we’re going to outline the top things you need to take into consideration when negotiating contracts with Oracle, SAP, and any other ERP system.

We’re going to share with you the key terms to clarify in your contracts to avoid extra costs and substantial frustrations down the road.

What to Look for in an ERP

While no company has a crystal ball to know exactly what the future will look like, you do need to identify how you’d like your business to function over the next 10 years.

Why 10 years?

Typical business roadmaps project as far as 3-5 years in the future. Most ERP systems relationships last a minimum of 10 years. You need to know how your business will function in order to know what you’d even need an ERP for and what it would need to do.

You need to be risk-averse in your contract negotiation in order to cover your bases for what could happen.

Once you have your future vision in place, you’ll look at the supplier landscape. Compare what each of the top ERP systems providers offers and how it’ll meet your needs outlined above. Create a Supplier Decision Matrix and stack each contender against it to determine which is the best for your corporation.

Once you know which ERP software is right for your corporation, you’ll need to dig deep to really figure out the total ownership cost. This is the tricky part and is best handled through careful contract negotiation, financial analysis, and service management.

Key Things to Consider When Negotiating an ERP Software Contract

The contract is the most important factor when determining the total cost of ownership of the ERP and there are generally only two triggers for renegotiation once a contract is in place.

These triggers are: mergers & acquisition activity and contract renewals.

Providers know that you don’t read ERP contracts every day. They design contracts in complex and ambiguous ways, which leads to more revenue for them - and more fees for you.

Each of the following points needs to be specifically addressed and outlined in your contract to prevent your ERP from holding you ransom at various times over the course of your relationship.​

Pay Attention to Intellectual Property Ownership

Many ERP contracts will state that any systems or processes developed while using the ERP are now Intellectual Property (IP) owned by the ERP provider.

We worked with a customer recently in the manufacturing industry. They had developed a process for creating their materials more efficiently going through the production line. According to their contract with their ERP provider, it shows that any process that you develop using the ERP software can be considered ERP owned IP. As such, we needed to carefully negotiate the situation with the ERP provider so as to not cannibalize the newly found process improvement which led to millions in positive P&L impact (new revenue and cost savings).

In a contract, you need to be very clear who owns the rights of process improvements as far as when it may directly or indirectly utilize an ERP system.

Your ERP is the backbone of your business. As such, if properly set-up and integrated throughout your organization, it touches most if not all aspects of your business. Naturally, this complicates any opportunity to disentangle from that ERP.

If Oracle, SAP or any other provider wanted to play hardball, they could say any process improvement that utilizes an ERP system could be co-owned or sole-owned by that ERP.  If this is the case, the provider could take that process and then go sell it.

In fact, one of our recent clients had this happen to them based on not properly reading the contract years ago. They needed to retain our expertise and a major law firm to seek litigation with that specific provider.

Make it very clear who owns what when negotiating your own contract. It needs to be clear that the client owns all IP that are developed for the benefit of their company.

Be Smart About Your License Cost Model

Everyone knows ERPs cost a lot. New contracts with smaller providers will often undercut themselves for the first year or two but will see a massive uptick in years 3-8 because the ERP knows it’s incredibly difficult to leave an ERP once you’re integrated into it.

The cost models of ERPs vary depending on the makeup of the customer’s business and what will be the most profitable for the provider.

Some of the pricing models include:

  • Seat-based: Typically the number of humans who log in to the system. These licenses can be either Perpetual or SaaS based.
  • Site-based: Number of physical locations, etc.
  • Consumption Based: Number of processes, inputs, etc., into the tool.
  • Value Based: The newest model within the marketplace and yet the scariest of all. A cost associated with the perceived value of using the platform within your business.

Generally speaking, seat-based pricing is the most cost-effective for companies looking at ERPs, but this depends greatly on what your 5-10 year plan looks like to know which would be the most beneficial to you.

In addition to your unit cost, there could also be annual maintenance expenses. This acts like an annual expense and is generally a percentage of your perpetual license fee/net spend with the ERP.

There are 2 ways to host an ERP system:

  • On-premise: Software that is loaded on the servers you’re in control of.
  • Software as a Service (SaaS): Software is hosted in the cloud by the provider.

Either way, you need to be careful how you license a product because if you don’t have control of consumption and volume-based metrics, it can skyrocket your costs.

Know Your Audit Rights

This is one that gets people in trouble a lot. Generally speaking, Oracle and SAP will not proactively limit access or connectivity to your ERP. This almost always is the responsibility of their customer, based on their unique needs.

As such, these providers will contractually allow themselves unfettered access to your ERP environment with the intent of auditing the usage of their software.

The most common areas of audit risk are:

  • License compliance (Using more seats/volume/etc than you are paying for)
  • Architecture compliance (Too many API connections, etc.)
  • M&A compliance (Acquisitions, divestiture, subsidiary utilization)

Depending on your unique situation, you may be subject to all three (or more) risk areas. It’s important to know there is intentional ambiguity by the software providers in how one could interpret contract language related to permissible use.

Furthermore, we find that clients have no intention of noncompliance within any area but find it most difficult to monitor and govern the area of architecture compliance. A common example of routine noncompliance when a client links their ERP system to both development and production environments.

Similarly, if an ERP is connected (in anyway) to a client’s CRM system it may also trigger a non-compliance event for both architecture and license compliance due to the fact that a client almost always has more active users within a CRM environment. Those CRM users may be somehow benefiting from the ERP and well, we’ll leave it to your imagination based on what you’ve already learned from this article.

Over the last 10 years, large ERP providers like  Oracle and SAP have been focused on audit rights within a client's environment. Specifically, when an ERP is living within a client’s infrastructure (on-premise) it’s technically infeasible for the provider to proactively monitor license compliance.

As such, these providers are inserting audit right language within to client’s contracts (both new and old) providing the legal authority to conduct random audits of a client’s environment. The providers deploy both human and technical based tools. The technical tools include running scripts that “listen” to your environment.

These scripts are developed by the provider themselves and are programmed in a way to identify every single endpoint. The output of the script’s analysis is a single report that identifies ways in which the client is potentially non-compliant. This automatically places the client in a defensive position leading them to try and disprove any sort of non-compliance allegations.

These guys make huge revenue by running these audits and identifying non-compliance. Architecture based non-compliance is most often the most profitable audit for a provider. In addition to what we’ve already stated, another risk area is when your ERP is connected to other systems outside of your current infrastructure.

In a nutshell, every time you make a connection between your ERP and another outside platform (often done through APIs), the ERP provider may identify this as a missed charge and will charge you retroactively since the connection was initiated. This can easily develop into millions of dollars of new revenue for the ERP providers (with very healthy sales commissions).

Not only with the ERP provider monetize the API connection with an API charge but will also try and push  value-based pricing.

For example, a client is connecting different systems together (using APIs) - this is the backbone of how their systems work. It is going to help them go to market faster.

The ERP provider is arguing the fact that “you are going to get an extra 20% increase in value from the system now vs what we quoted you. As a result, we are going to increase your fee by 20%.”

Value-based pricing is risky because these providers can charge for new API connections, new acquisitions, product launches, and/or the output of the tool and how it can help you run your business. It’s based on potential and not necessarily even realized revenue!

Don’t let a provider run a script inside your environment. If they don’t have access to your information, you’re in control of it and you remain in the driver’s seat.

Have Clear Merger & Acquisition Language

Put specific clauses in the contract that make it very clear what happens if you are acquired or if you acquire someone else.

More often, it is the provider who offers this language. These companies will put in very loose language to say ‘if this happens, we will talk about it’ which leaves a lot of area for ambiguity.

To best prepare yourself for any situation, we recommend you place specific and measures or language in your contract that outlines the cause and effect for the most common situations.

Specifically, you’ll want to identify what happens if you are acquired or if you acquire a separate entity. Within any of these situations it’s important to have clear legal language regarding the rights of your company. From a commercial perspective this means having specific pricing thresholds.

Simply put, If you are acquired, you take the better of two prices. You take the best price of both until you, as the newly combined customer, want to renegotiate.

If you are acquiring a company, it’s important to insert legal language allowing you to renegotiate the contract immediately or rather simply adding the newly acquired entity into your existing contract with only a reasonable increase in fees. From a commercial perspective it’s important that you outline what (if any) additionally fees would be subject to the transaction.

You want to eliminate ambiguity. From a pricing standpoint, you want to make this as clear as possible.

Set Expectations About Subsidiaries

You also want to know the specific parties of the agreement. A common hiccup for companies is that they don’t have subsidiary language in their ERP contracts. A company like Coca-Cola, where each product line acts as its own subsidiary, could be in default of the contract by letting that subsidiary use your system without proper language.

This is something people don’t think about until your provider comes to you and says, ‘Hey, by the way, your other subsidiaries are using this ERP software. Happy you are doing it, but that is not part of your contract so here is a bill for another million dollars.’

Third parties—suppliers, vendors, non-employees—need to be defined in the contract as well. If third parties are allowed to act on your behalf, there shouldn’t be any additional fees for them to use your system.

Be Sure to Outline Price Protection

Another thing you need to consider when negotiating your contract is price protection. Generally speaking, companies don’t write in any sort of price protection year-over-year.

What that means is that over the contract term, your ERP provider could change the price points of your unit costs at any given time.

It is not just about being clear about locking in your price at contract term, it is also putting a cap on the amount of increase that can happen at the next contract renewal, which needs to be aligned to the Consumer Price Index (CPI).

A general rule of thumb is that the increase shouldn't exceed 3-5% at renewal.

Include Clear Terms Around Your Service Level Agreement (SLA)

An ERP is a critical piece of software for any corporation and yet we often don’t negotiate Service Level Agreements (SLAs). If ERP systems go down, it can shut down governments and grids. It is a critical software within companies for good reason.

Make sure that you have the best service level agreements and governance agreements by specifically outlining them in your contract. Including these will ensure that your provider keeps their service at 99.99% performance.

In addition, there needs to be penalties for an ERP provider not meeting or exceeding their Service Levels that you agreed upon in your contract.

Most contracts will put in language about penalties but most companies don’t catch ERP providers when they are starting to fail. There are hundreds of thousands of dollars left out there because no one said “Hey your service was down over the weekend. That creates a $200k payment because it has been down for X hours.”

If a big company hires an IT governance professional to monitor that, that professional will likely be ROI positive. You pay them $130k salary and then get $250k-400k in fees coming back from the ERP provider.

Along with keeping an eye on the service levels internally, you need to put the ownership on the ERP provider to send you reports of the performance versus making you have to monitor if it was working correctly. You should put the onus on the ERP provider versus on your employees.

The big providers won’t allow this very often but the smaller ones will. Make it the obligation of the ERP provider to know that there has been a breach in the SLA.

The big ones, like SAP and Oracle, will send automated reports and humans have to look into them to see if there is an issue.

Don’t Forget Cybersecurity and Intrusion Detection

You need to be careful that if you get hacked, you don’t owe your ERP provider or are legally obligated in any other way to pay a hacking fee. This is called indemnification.

In matters of cybersecurity and hacking, your contract should stipulate that the ERP provider should be accountable, if possible. There should be financial and legal obligations, and your ERP software provider should be responsible for any sort of intrusion into the system—especially if it’s located in the cloud.

The concept being that if someone hacks your environment, the source code from the ERP could be opened to the black market for rip off and resell.

People don’t look out for this enough and hackers are getting more sophisticated every day.

Know the Rules About Implementation Partners

Implementation partners are third parties that will help develop custom code on top of the ERP system for your business.

Most of the time, your contract states that any implementation partners have to be registered as “Preferred Providers” for your specific ERP software.

You can’t have just anyone build custom code on top of an ERP system, it has to be an approved vendor.

It is a contractual risk to your company if your contractors are not certified by your ERP provider.

Your E-Commerce System Needs to Play Nice

If your company is in eCommerce, you need to make sure that there is an active and working connection between your ERP provider and your eCommerce provider.

Many ERPs will tell you “Don’t worry, we will make a connection.”

What they won’t tell you is that the connection they make will cost YOU more money. Your contract needs to dictate who is accountable for paying for any connections that are required for your eCommerce platform and your ERP system to play nicely together.

We always make the new piece of software that is connected to the ERP system pay for the API. It is the third party’s cost.

We just had a client that we saved about $500k for this very point!

They have an ERP system and they were working on getting set up with an eCommerce platform.

There was one sentence in the contract that made it ambiguous on who pays for the cost of being able to have different systems to talk to one another.

The ERP software provider was planning to charge it back to the client and the client didn’t even assume that would be their cost.

That basic API connection should not be your cost to maintain and pay for - stipulate in the contract who is responsible (ideally the third party) ahead of time so you aren’t stuck with a huge bill.

Make Sure You Have Coterminous Contracts

Another big thing to look out for is coterminous contracts. In most large companies, each department will have separate contracts with an ERP provider and these contracts won’t align on the same termination date.

If you have multiple business units in a company, the provider will often split out their budget and license fees per business unit.

This is the biggest trick in the book and the largest companies in the world forget to do this step.

It creates massive chaos because you can’t get everyone on the same page. This situation forces the client to align internally at multiple times throughout the year in the interest of representing the entire company. Clients typically lose 10 - 20% when they are in a non-coterminous environment. .

If you you are subject to an non-coterminous environment, then the ERP provider is in the driver’s seat. They will divide and conquer you. This is called a split requirement and they will negotiate with each department individually.

In other words, the ERP software provider negotiates at a business unit level versus an enterprise level. At enterprise level, you have volume and leverage to get better terms which typically drives an additional 10-20% in value.

In Conclusion

Whether you’re negotiating an initial contract or a renewal, make sure you develop and maintain a total cost of ownership view.

First, make sure you understand how your business will be growing over the next 10 years.

Then, dissect the contract so that you better understand the unit cost and connection fees.

In the contract, layout all potential possibilities early as opposed to being forced to react to them as they come along. The more prepared you are, the better you’ll be able to handle surprises, pivots, and conflicts.

Make sure that in the contract, each of the specific points outlined above are detailed with zero ambiguity. Hit all these points as a minimum.

The truth of the situation is that the sales representatives at these ERP providers know you aren’t negotiating an ERP contract everyday. While we’re not saying that every ERP sales representative leverages this face in a malicious manner, it’s important to understand how to protect your company.

As you can see, there is a lot to take into consideration when negotiating contracts with ERP providers. Keeping these points in mind will help you to protect yourself and your company. If you need help implementing any of the above, we have the experience and know-how to protect you from being held ransom now and 10 years down the line. Reach out to us, we’re here to help you with negotiating contracts with your ERP provider.

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From Fortune 500 giants to fast-growing innovators, TNG has helped clients save 20% – 40%+ on enterprise software contracts — even when they thought it was impossible

How to Create a Salesforce Roadmap

In previous articles, we shared with you how the Salesforce machine operates. We shared with you how it structures its organization and the tactics it uses to maximize its revenue from your company.In this article, we are going to dive into your single most important weapon against Salesforce in your negotiation . . . Your Salesforce Roadmap.

​What is a Salesforce Roadmap?

Simply put, a Salesforce Roadmap is nothing more than a table outlining:

  • What you are going to buy
  • When you are going to buy it

This sounds simple, yet most companies don’t go into a negotiation with Salesforce clear on these two points. As a result, Salesforce hijacks the conversation and creates a roadmap for them.

What you are going to buy

This question isn’t always as simple as it sounds.

Do you need Enterprise or Unlimited?

Do you even need premium support? Or would that money be better spent on a 3rd party consulting firm?

Have you run a utilization report to see how many of your licenses are actually being used?

​Is marketing actually using that instance of Pardot you purchased three years ago?

The “what you are going to buy” conversation isn’t always easy. One company we worked with ran a utilization report to find that only 63% of their licenses had even been logged into in the past year. This means they were paying for 37% more licenses than they actually needed!

Another customer realized that a large portion of his organization could get by through downgrading to a lower license level. They were only using basic features that didn’t require them to be at the Unlimited License.

It’s easy to think you know exactly what you need going into a negotiation, but sometimes you need to do a bit more digging into understanding how each department actually utilizes the tool.

When you are going to buy it

Another common tactic Salesforce uses is to tell you that you cannot roll out licenses over the course of a three-year contract. Your rep will tell you that you need to buy them all up front now if you want to get a discount.

This ironically always works out in Salesforce’s favor as the added revenue from those dormant licenses makes up for the discount one rates. The truth is you can negotiate to roll out licenses at set periods of time throughout your negotiation.

​In order to do this though, you need a clear roadmap and to create confidence with Salesforce that this is what you actually need and when you need it.

Why Is Building a Salesforce Roadmap So Important?

Before we dive into how to create this roadmap, let’s first dive into explaining why this roadmap is so important.

A roadmap is your best defense against divide and conquer

Remember the divide and conquer tactics we described in our guide on negotiating with Salesforce? We shared with you how Salesforce will make contact with multiple individuals and decision-makers throughout your organization.

Its goal with divide and conquer is to create conflicting stories which develop chaos in terms of what you actually need.

Creating your own Salesforce Roadmap helps you prevent against that.

When you create a roadmap and get buy-in from all your key stakeholders on that same roadmap, you create alignment within your organization. In addition to the roadmap, we are also going to give your internal stakeholders key talking points on what to say if Salesforce approaches them. It’s also important to know that timing is everything with regards to these key messages.

As a result of being aligned on talking points and what your organization actually needs, your organization begins to speak from one voice. Instead of having Salesforce gather conflicting stories from each department, they suddenly are left dumbfounded when they receive the same story from all contacts within the organization.

Flip-flopping your wants in the negotiation focuses the discussion on the wrong things

Whenever you don’t have your roadmap aligned, you spend your time in the negotiation with your rep going back and forth on how many licenses you need or what add-ons you do or don’t want.

Every time you go to your rep with a revision on your renewal because you and your team changed your mind, you are wasting a valuable chance to negotiate a key term or reduce your rates.

Without a roadmap, you will end up flip-flopping on what you want during the negotiation and spend your time focused on what licenses you are even going to buy instead of the price point or the terms. The entire negotiation gets focused on just figuring out what you need instead of getting you the best rates.

Your roadmap creates that clarity and alignment and lets you spend your time focused on getting you the best deal.

A lack of alignment undermines the key contact of the negotiation

Imagine for a moment that you are a Salesforce rep. You go into conversation with the Salesforce Admin who is your main point of contact in the negotiation. The Salesforce Admin request a 20% license count increase but is not interested in adding any new products or expanding their Salesforce footprint into any new departments.

Then two days later, your sales management team comes back from a basketball game with the CEO of your client organization. They tell you “we just met with the CEO, he wants to roll Salesforce out to his entire marketing department as well.”

As a Sales rep, you immediately jump to the conclusion that your Salesforce Admin is not the authority or decision-maker on this account. All respect you had for this Salesforce Admin’s decision-making ability has gone out the window.

As a result, that Sales rep treats the Salesforce Admin differently in the negotiation. He starts going around them and maximizing his divide and conquer tactics because he knows the Salesforce Admin is not in charge.

This is what happens when your organization is not aligned.

It undermines the individual who is the face of the negotiation. It doesn’t matter if it is a Salesforce Admin, CIO, or CFO.

Alignment and a roadmap gives power to the negotiator

Let us imagine another scenario for a moment here. Imagine that you are a Salesforce rep. You go into a conversation with your Salesforce Admin who is your main point of contact. The Salesforce Admin tells you they want to increase sales cloud licenses by 20% and consider a demo of Pardot in their marketing department.

Then two days later, your sales management team comes back from a basketball game with the client CEO. They tell you “we just met with the CEO, he wants to grow his licenses by 20% and is considering expanding Pardot into their marketing department.”

As a Sales Rep, you just heard consistency.
You heard that your Salesforce Admin is aligned with the CEO.
You heard that your Salesforce Admin is actually in charge of this negotiation.

When you have organizational alignment on your roadmap, it gives power to whoever is running your Salesforce Negotiation. It doesn’t matter of it is the Director of IT, CIO, or CFO. Whenever you have that alignment of stories, it gives that person in the negotiating seat power to drive the negotiation on their own.  

When to Create your Salesforce Roadmap

We typically recommend companies start building their roadmap six to nine months prior to their negotiation. You are going to want at least three months to handle the actual negotiation with Salesforce so a six month runway gives you an additional three months to get that internal alignment.

Each organization is different, but that internal alignment won’t happen overnight. Give yourself some time to meet with all key stakeholders and achieve that internal alignment.

Three Steps to Creating your Salesforce Roadmap

A Salesforce Roadmap is not complicated. It is a simple table of “what you need” and “when you need it” over the next three to five years.

Even though most Salesforce renewals are only three years, it is helpful to plan five years in advance so you can think of a bigger picture of what may be coming down the line. This helps you in creating an aligned story for Salesforce at your renewal.

Step 1) Create a rough draft alone

If you are reading this, chances are you are the one who is driving the Salesforce negotiation. You have extensive knowledge of Salesforce and can probably fill out 80% of the roadmap on your own.

The key in this step is to document all of your ideas for the roadmap on paper.

You don’t want to go to your key stakeholders with a blank slate and build the roadmap from scratch together. That is not a good use of their time, and it is going to create too much debate.

By crystallizing your thoughts about Salesforce into a rough draft of the roadmap, you can share that document with others. It becomes a starting point for the entire roadmap discussion.

Step 2) Take the rough draft to key stakeholders for feedback

This rough draft of the roadmap is purely for internal use. Once you have this rough draft complete you are going to present this document, typically in the form of a PowerPoint presentation, to your key stakeholders within the organization.

This may be your CEO, CFO, CIO, COO, VP of Sales, Director of IT, Salesforce Admin, Sales Management Team, etc.

You are going to take this roadmap to them and say “This is what I believe our 3-5 year Salesforce roadmap looks like...what feedback do you have?”

As you go into these meetings you may find yourself saying, “I have an idea here but I don’t know exactly what X department needs.” This roadmap and these conversations are meant to help you refine the roadmap and clarify those needs with each department in the organization.

What is great about this step of the process is that this allows your team to have internal dialogues about what you need with Salesforce. Without doing this internal roadmap, these contacts would not be brought into the conversation until a contact from Salesforce had reached out to them.

Instead of letting Salesforce guide these conversations, you are getting in front of them and taking charge. This helps you own and drive the conversation.

Step 3) Gather all feedback and refine your roadmap

Once you have gathered alignment from each of your key stakeholders on the roadmap, you are going to want to take some time to sit down and refine that roadmap into a final polished version.

At this point, you are almost ready for entering the negotiation. But before that we need to build a communication strategy and negotiation plan.

Lastly, it's also important to realize that a Salesforce Roadmap is essential for SELA Agreements (Salesforce Enterprise License agreements). Read our guide for more details on how to renegotiate your SELA Agreement.

Confidential Clients: Why We Do It

For those of you wondering why we keep all of our clients confidential, our Founder and Senior Partner Dan Kelly provided a few key insights as part of a recent interview. We hope you appreciate learning why this is such an important guiding principle for TNG.

Moderator: Keeping your clients confidential is a pretty bold and respectable move… Why does TNG do it?

Dan: It’s a great question and one that comes up often during initial conversations with our prospective customers. We find that customers are more curious as to the reasoning versus questioning the legitimacy.

We treat each engagement with a customer as if it were a legal proceeding. We find that our ideal customers really appreciate how sensitive we treat our collaboration with their company and their most senior stakeholders/leaders.

From a logistical standpoint, some customers reach out to us when they are trying to commercially mediate what appears to be a potential legal situation with an external vendor. 95% of the time, we can handle the situation via commercial negotiation. If the situation does require any sort of legal support or litigation, our team is ready to quickly support and collaborate with our customer’s legal team based on our strict confidentiality and document handling standards.

Moderator: Did your background in the FBI contribute to your decision on this approach?

Dan: {Laughing} Yes, I think it probably did. There were two things that I was taught immediately upon entering my FBI career: 1) Before you make any questionable decision, think about how the outcome of your decision would look on CNN the next morning and 2) Classified information is best protected on a compartmented, need-to-know basis.

While our entire team doesn’t come from an Intelligence Community background, everyone is provided training on the importance of confidentiality and the proper procedures for protecting client confidential materials. I can confidently say, without a doubt, that our customer data and processes are more secure than most multinational law firms.

Moderator: When you have prospective clients looking to speak with references, aren’t you afraid of losing potential business if you’re not willing to share your client portfolio?

Dan: You know the business owner in me honestly thinks about this a lot. From an actual data standpoint, we know that if a prospective customer chooses not to work with us, it’s primarily due to cost and not caused from the lack of reference calls.

Another fact that we’ve proven over the years is that 3 out of 4 clients request repeat or ongoing support, so any lost opportunity from this topic is naturally superseded with our repeat customer business. That’s how I would prefer it anyway, as taking on a new customer brings its own inherent risks… it’s a two-way street.

Moderator: How do you make clients feel comfortable working with you if they aren’t able to speak with references?

Dan: My answer on this is simple: Everyone has friends. Do you honestly think any salesperson, no matter what industry, is going to refer you to a client that has had a sub-optimal experience? I am a Strategic Sourcing Expert, and so is the rest of the Service Delivery Team. When we worked for large companies, we often were told to ask for references. However, whenever we received reference contact information, we rarely called them to validate. This reference gathering process is an old school purchasing process for process sake, and we find our best customers find more trust in the fact that we were ranked as the 2nd fastest growing company in Minnesota by Inc Magazine.

Moderator: What are some other benefits that might not be apparently obvious of keeping clients confidential?

Dan: Excellent question... This is a passionate topic of mine of which I could honestly discuss for an hour. In the interest of brevity, a few of the top benefits include:

Ease of Contracting – No Publication

Most of our clients are very large multinational organizations. The Marketing and Legal departments inside of these companies are naturally very protective and risk adverse (for good reason) of their name brand, logo, etc. Since our customer contracts don’t include any language regarding “publication,” it eliminates unnecessary administrative burden, and legal review cycles, on both sides of the transaction.

TNG Client Protection

Most of our clients request that TNG be a covert silent advisor in the background (instead of an overt legal agent of the company). This means that the supplier in which our customer is negotiating with should never have knowledge of our involvement. By keeping all clients confidential, we eliminate any risk of the supplier later discovering our involvement.

Deter Sales Snooping

Without going into too much detail here, just know that large software companies have an incredible amount of financial resources. They employ individuals to be assigned, or even sit in, your organization to learn everything there is to know about your company in the interest of upselling their products and services. This also includes learning as much as they can about what companies are using external advisors to benchmark rates, processes, etc.

7 Most Common Mistakes to Avoid When Negotiating Your Salesforce Agreement

​We commonly get the question: “What are the most common mistakes and/or things to avoid when negotiating a Salesforce Agreement?” So much actually that we thought it made sense to write a short article for all to consume.

​A Customer Relationship Management (CRM) platform is commonly within the top 5 expenses within every CIO’s annual budget. The day-to-day operations of business serve as a natural distraction for all of us and, if you don’t negotiate contracts all day long, it’s near impossible to know all the information you need in order to successful prepare and execute a negotiation strategy. Negotiating a Salesforce contract is tricky and can be extremely complex. Don’t underestimate the time, effort, or expertise you’ll need, or you’ll quickly lose control of the entire deal.

Here are the 7 most common mistakes we find CIOs and IT Management Teams make when negotiating their Salesforce agreement:

1. Failing to prepare

While this may not come as a surprise, the single most common mistake is failing to allocate enough time, resources, and expertise to properly prepare for the negotiation.

Ask yourself this: Would you ever go to a car dealership and take the first car they offer without first doing your research on price, warranty, etc.?

As a CIO or IT management team, you should not make assumptions or rush through the process of finding and/or negotiating your CRM platform. No matter whether you are searching for a new CRM platform or simply renewing your existing agreement, make sure you take time to understand the business and digital capabilities you are looking to acquire and/or augment. Take time to conduct interviews across the organization and create a business canvas of those needs to create a simple viewpoint of the wants and needs of the entire organization.

We advise our clients to start 6 months prior to any anticipated contract execution date.

2. Failure to look at the bigger picture

We find CIOs, IT Management Teams, and Salesforce administrators are great at thinking about the relatively short-term needs of their organization but commonly forget to keep the big picture in mind. As with any strategic supplier relationship, you need to think about how the pricing, requirements, and relationship with Salesforce will look over the next 3-5 years. Instead of looking at the short term, think strategically about your organization's goals and the relationship you want to build. You need to approach your CRM vendor with a long term mindset. Look at how their services will be beneficial to your organizations in terms of growth and transformation. Make sure you prepare a compelling forward-looking strategy that is deliberate in identifying how the Salesforce relationship will benefit your business. It’s equally as important to understand how Salesforce views its relationship with you. Only after both sides understand the current state of each organization can it build a plan forward.

3. Focusing too much on price

Our clients are almost always surprised when we say this statement. While price is ultimately very important in any commercial agreement, it’s equally as important to validate that you have the proper products and services for your organization.

“Right Size for the Right Price” – Dan Kelly, The Negotiator Guru

If you’re a new customer, make sure you’re not overbuying at the start…remember, adoption always proves to be slower than you will anticipate when introducing a new CRM platform.

Subsequently, it’s all too common for the sales team to overweight your 1st year agreement as they are solely focused on capturing as much revenue as possible from your account.

If you’re an existing customer, conduct an internal audit of your products and services that are currently part of your Salesforce ecosystem. Make sure not only these products and services are being used (the easy part) but also that they’re being used appropriately. Very often we’ll find opportunities for our clients to downgrade while still achieving the same business functionality required.

4. Not considering all your options

It’s important to keep a pulse on the marketplace…there are multiple CRM platforms out there and while Salesforce is the industry leader they may not be the best fit for you.

Subsequently, if you are a current Salesforce user then it’s equally as important to conduct a deep dive assessment on how other peers in your industry are using Salesforce. A properly run CRM platform should not only optimize the sales process but also drive efficiencies in back office operations, etc. If you identify (and you most likely will) new areas where Salesforce can assist your business, carefully bring this up as an opportunity during the negotiation process. Again, we urge the word “carefully.”

5. Not developing Executive Level relationships

As written in previous articles, Salesforce has set-up its very own incredibly effective sales machine. While we won’t reiterate the previously written articles it’s important to call out that most Salesforce customers underestimate the importance of developing and engaging VP level and higher relationships at Salesforce. Only these levels have decision making authority on your account. If these individuals are on your side, and understand your story, you’ll be far more successful in your negotiation.

6. Failure to create a strategic internal communication plan (as part of your negotiation strategy)

Almost everyone fails at developing a bulletproof internal communication plan. While the saying “speak from one voice” is widely used and understood in negotiations, it’s not enough to simply rely on human beings to say exactly the same thing at the same time. Instead, we advise our clients to develop a communication plan that provides key talking points for different levels of the organization. These talking points all align to the same objective but are developing in a way that reinforce message authenticity for that specific stakeholder.

7. Neglecting to include your C-Level Executives in the negotiation

Related to the previous point, we find that the majority of organizations we advise have historically tried to limit and/or eliminate any C-Level interaction with Salesforce. This is naturally understandable (based on common thinking) but actually a serious mistake.

Salesforce takes great pride in, and places great importance on, developing relationships directly with their customer’s executive team.

We advise clients not to fight this point but leverage it. We admit that we used to get this point wrong ourselves. We used to ensure the C-Suite knew not to say anything and only redirect messages to a single point of contact. The big problem with this is that the c-suite really likes to talk! Instead of fighting this natural instinct (and skillset) we advise our clients to leverage it by creating a C-Suite communication and engagement plan that empowers the negotiation plan.