Posted by Duncan Jones on February 10, 2011
It’s a beautiful sunny day here in England, the first snowdrops have appeared in my garden and at least one of my pet hens has restarted laying – yes, Spring is on the way. Meanwhile, in the US the main harbinger of the changing season is the migration of baseball teams to Florida and Arizona for their annual pre-season ritual known as ‘Spring Training’. In the software sourcing world, the rites of Spring often include major negotiations with Oracle and Microsoft ahead of their fiscal year ends of May and June respectively. That’s why this is a perfect time of year to get some spring training of your own, at one of our ever-popular Microsoft Negotiation workshops.1 Anyone considering a major purchase or renewal with the Redmond Sluggers between now and the World Series should come along to Amsterdam on February 16 or Dallas on March 2 to hear why they may have extra leverage this year, and how to use it to get the best possible deal.
Microsoft had very high sales revenue for its December quarter, particularly the business division, but that didn’t come from the multi-year Enterprise Agreement (EA) and Software Assurance (SA) deals that the direct sales teams need. Microsoft’s revenue boost came from one-off purchases of its just-released Office 2010 product through its retail and small business programs. EA/ SA deals would initially appear in the accounts as unearned revenue in the balance sheet, and that was at the same level as two years earlier.2 So these results are consistent with our research that predicts that Microsoft’s direct sales teams will struggle to meet their tough EA bookings targets this year, and that will strengthen prospective buyers’ negotiating position.
We can’t promise warm weather or adoring fans, but our spring training session will help you with:
- Getting fit to negotiate with Microsoft. What homework should you complete before you sit down with the sales team? How do you evaluate SA’s benefits to decide at what price that program will make business sense for your oragnisation?
- Game planning an effective negotiation strategy. What incentives can you offer, and what credible threats can you make that will persuade the rep to give you his best possible deal?
- Fielding questions about Microsoft licensing from your stakeholders. Which features of Microsoft’s unique licensing programs and policies should they factor into their technology adoption decisions?
- Catching potential licensing problems before they arise. Where are their pitfalls that can trap the unwary, such as Roaming Use Rights and Multiplexing?
- Running an effective negotiation. How do you stay in control of the process, to prevent the sales rep undermining your leverage or using your deadlines against you?
- Fighting off the rep’s nastiest pitches. For example, how do you deal with his fast ball (“you have to accept this deal by the end of the month or the price will go up”) or curve ball (“I’m sorry, but that usage scenario contravenes our licensing policy”)?
- Covering the bases. How do you prevent the sales rep going above your head? How do you stop colleagues undermining your negotiation strategy?
Bottom Line: Microsoft contracts are major business decisions that impact technology adoption in addition to costs. Sourcing professionals with potential SA deals will have exceptional leverage this year, if you know how to apply it effectively. If you’re in this situation, please come along to one of these upcoming workshops to learn from your peers, my expert fellow coach Chris Voce, and me.
- Upcoming Sourcing & Vendor Management Workshops
- Microsoft accounts for these types of deals as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the billing coverage period. (Source: Microsoft’s revenue recognition accounting policy from its 10K report). For example, a $3m license purchase on December 31 under the Select program would be revenue that quarter. An equivalent EA deal would be $2m ‘booked not billed’ and $1m of unearned revenue. The business division’s unearned revenue balance on Dec 31, 2010 was the same as two years earlier, which suggests that new EA/ SA bookings in 2010 were no higher than in 2007, although many other factors such as deal timing could blur the picture.