The Penny-Pincher's Guide to Buying Business Software
October 17, 2007
By Gene Marks
There are lots of great software companies out there who care about their customers and who provide great software at a great price. But here's a secret I'd like to share with my fellow penny-pinching business owners—big software companies really only care about two things: how many licenses they can sell and how to make sure their customers are roped into annual support agreements. Do they care about your long term profitability? No. The fact that you're paying maintenance is all that matters.
Let's say you're buying a new accounting, database, inventory, order entry, inventory or system for your company. Chances are you haven't done this a lot. You don't want to overpay and you're uncomfortable buying something you can't really see. Here's a few ways to save some big bucks:
1. Vendors Compete
For starters, never believe list price. It's a lie. If you're spending more than $5,000 for a piece of software, you'll get a lower price just by asking. It's a jungle out there. The competition is fierce. Software vendors desperately want to sell more licenses and they'll shave off a few points—or even sell their sisters into slavery—to make sure a deal doesn't go away.
2. Timing is Everything
Find out the end of the vendor's fiscal year. Like any used car salesman, a software company will always play "let's make a deal" when a period end is coming. Target your negotiations for the end of the month, quarter or the end of the fiscal year. Software companies have regional representatives who get a paid a commission on every license sold. They become ravenous for a deal as a period end approaches.
3. Test Drive
Better yet, don't buy the software at all until you go live. Ask your local partner to install, customize and train you using their own "not for resale" license. Make sure to pay the partner for their time but don’t buy the actual licenses until you're live with the new system. Are you being a jerk No. You're being forced to do this because most software companies don’t like to refund money after a shipment has been made.
4. Internal Experts
Good penny pinchers also do a lot themselves. They assign an internal administrator, or system champion. Maybe it's a good user or even the office manager, but usually it's someone who will take the extra time to get really good with the system. That way you're not shelling out huge dollars to the local software company for services that can be done internally. Take the extra time to learn the system and you can wave goodbye to those exorbitant consulting fees.
5. Reporting Right
Focus your payments around reports. In the end, whatever you're buying is just a database no matter how many ways the software company wants to convince you that it's the cure for cancer. You need certain reports out of the system—like open orders, jobs in production, accounts receivable/payable, etc. Agree in advance what reports you want to see from the system—when your system is delivering this information, you deliver your payment. It's a very black-and-white approach to dealing with those software vendors who love grey areas.
6. First-Hand Discovery
Spending more than ten grand on that inventory management system? Go to the vendor's location and get trained before you buy. Once there, go armed with questions. Interrogate the guy doing the training (he won't be a sales guy so you'll get the real dirt). Ask the other attendees how much they're suffering and mingle with customer service. Find out about any skeletons in the closet that the sales person, eager for his paycheck, conveniently forgot to tell you.
Gene Marks, "The Penny Pincher" is the owner of The Marks Group PC (www.marksgroup.net), a ten person CRM consulting firm based outside of Philadelphia, PA. Gene has written four books and speaks frequently on penny pinching topics to business owners and managers nationwide. His "Penny Pincher's Almanac" column appears nationwide in American City Business Journals.
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