4 Ways to Maximize Leverage in a Microsoft Deal
Published on 26 Feb 2021
Why is leverage important in a negotiation?
Negotiating without any advantage is another form of begging. Often IT buyers approach Microsoft without enough time to execute a competitive deal, no alternatives to the vendor’s proposal, and no valid reasons for Microsoft to offer a better deal. The vendor’s sales teams are masters at executing their “T Minus 36” strategy, which involves a 36-month run-up to your next deal. The purpose of this activity, which begins before the ink is dry on your last Microsoft deal, is to eliminate any and all sources of leverage a business may have.
The typical Microsoft renewal requires 9 to 15 months of preparation, and a good rule of thumb is to begin deal-making activities no later than the year 2 True Up. Most of your leverage in a renewal deal comes from gathering accurate data about current and planned usage, starting with a comprehensive count of Microsoft licenses. The scope and complexity of Microsoft licensing make these activities extremely time-consuming. In addition, you must build an organized a deal team with executive sponsorship that can create and carry an effective business case to Microsoft, this adds to the complexity of the renewal. Organizations that give themselves time to properly prepare can proactively engage Microsoft in renewal discussions and can drive the conversations around their needs, instead of allowing Microsoft to run their sales process and the clock. Recommendations to follow when negotiation with Microsoft:
Make sure you have a plan B:
Considering alternatives for Microsoft is easy during your first purchase but once Microsoft products are widely used across an organization they become entrenched in your business, threats to replace the entire platform are less viable. If Microsoft believes you’re locked into their solutions, how do you build leverage? You can do this in three ways:
- Play with sales motivations
- Alternative deal structures
- Competition matrix
Play with sales motivations
Remember that you are negotiation with a human, a sales representative and not Microsoft as an entity. Microsoft has its own incentive structure and rewards programs for its sales team. You can use this structure to your advantage. For example, Microsoft incentivizes the use of their cloud products, however many of these products are available in on-premise variants. You can gain leverage by having a plan in place to reduce your cloud consumption. Sales teams lose compensation for late renewals. By threatening to miss the renewal date you can get some leverage for your organization.
Alternative deal structures
Microsoft gets less revenue from a MPSA purchase option. Enterprise EA or EAS deal structures require greater commitments from customers and are more lucrative for the company. You can get leverage against a sales rep by switching between these deal types.
Replacing the entire Microsoft platform is extremely challenging. However, there are viable options that you can get information about. You can use this information to negotiate more effectively with a Microsoft sales rep.
There are a lot more tactics that you can use to get a better deal from Microsoft and negotiate effectively with their sales team. Download this whitepaper by Clear Edge to learn more.