Having the powers of the God of the Old Testament would be a dream come true for most software procurement negotiators. Alas, us mere mortals can only dream.
Higher Authority As A Negotiating Tactic
But we can make use of a clever negotiating tactic which negotiators refer to as “higher authority”. It does not involve locusts or manipulating the weather, but nonetheless it can be viciously effective in procurement negotiations.
How Sales Organisations Use Higher Authority
Invoking higher authority in negotiations is something sales organisations do to great effect. How often have you heard a salesman say that he would like to give you an additional 10% discount, but head office won’t let him? Who is “head office”? For all you know no one in “head office” is even aware of your deal. It might just a line the sales guy throws you when he his offer will be accepted once the “head office” card has been played.
The Attributes Of Higher Authority
If you knew who “head office” was, you would call them up. But calling them up is never possible. That is the whole point. To be effective, higher authority must be:
- unidentifiable, and
As a procurement organisation, you should also have an undefined and inaccessible higher authority that will pronounce on your negotiations when you need it to. Ideally, this should actually exist, but even if it does not, you can make it up.
Calling it a board is always a good idea. This means that it is not just one or two people, instead it is an undefined number. Lend it authority by saying that the heads of all the business units appoint people to the board to make decisions on software purchases. This board is the ultimate decision-maker.
They can only find out what the higher authority will, and will not accept, through you. You communicate what the higher authority wants, and thereby dictate the demands. The sales person can argue with you till the cows come home, you are not the decision maker.
Situations In Which Higher Authority Can Work
This works in most buying situations, even in small organisations.
- For new purchases it can be an investment board with authority over new expenditure.
- For renewals, it can be a programme team charged with making aggressive cost savings.
- In negotiations where the terms and conditions are important, it can be a legal review board comprised of various specialists.
Don’t give the supplier anyone else to talk to. Only you, and you are only the messenger.
Higher Authority – A Pressure Value For Negotiators
This acts as a welcome pressure valve for you as the negotiator. You no longer have to justify and explain why you are pushing back. The push back is coming from “the board”. You can play the nice guy whilst at the same time pushing back on any aspect of the supplier’s proposal.
Your organisation may be too small for such structures, but that does not stop you from talking in these terms. Initiate a “board”. It might just be you the BU stakeholder and perhaps your respective bosses. Setup meetings with the title “Board Meeting Whatever”. Explain to your colleagues why you are doing this. When the sales person hears from three different people that the matter will be discussed at the board meeting on Thursday at 4, it is virtually impossible to argue with that.
Change The Rules Of The Negotiations
Whether the sales person believes you or not is irrelevant. The point is that you are choosing how you want to play the game and the sales person now has to live by the rule you have imposed. If you don’t impose some rules, then you will be playing to the sales guy’s tune all the way to PO release and beyond.
The Power Of Higher Authority
To see the power of invoking higher authority, read these two next two responses to a discussion point in a software licensing agreement:
“Mike and I discussed this and we feel strongly that if we are paying for perpetual licences we should have permanent licence keys. This is a matter of principle on which we must insist.”
“Mike and I presented this to the board and they reminded us of the company policy that perpetual licences should never be subject to a time limited licence key. The representative from our Legal department was adamant that this was a matter of principle on which we must insist.”
Can you see how the second version allows you to be much more forceful in your insistence simply because the message is coming from an impersonal, unidentifiable, and inaccessible source? You and your negotiating partner, Mike, appear far less confrontational, and so have more freedom to explore options and be constructive in the negotiations. Instead of you doing the confronting, the confronting is being done by the “representative of your Legal department”.
Let me know if you have other tips on how to make this negotiating tactic work in software negotiations.
Image credit: “Need help identifying this hopper” by Chris Dodson, Creative Commons, Flickr.com