Part 1 of Save Money on BI Purchase – As a licensed attorney with 20+ years in the software industry, I’ve decided to share the secrets of saving money on major software purchases. Here’s what the software companies don’t tell you and what you need to know to negotiate a contract…
1. Buying from a Reseller – Many software companies have a channel of partners that they authorize to resell and implement their solutions. These organizations get a margin from the software company to resell the software. You probably think “why would I go to them when I can go direct, and get the best deal.” Direct is not always the best deal.
Secret 1: Most resellers don’t make their money selling software, they are really consulting firms and their profit margins are much better on services. They want you to get a great deal on the software so there are more funds for the implementation of the software. Believe it or not, resellers can often sell for less than the software manufacture, because resellers don’t need layers of management’s approval to give you a great deal.
Secret 2: Because resellers are typically smaller companies whose livelihood is successful implementations, they care that you have the correct product mix. Huge sums of dollars are spent each year on Shelf-ware (software purchased and never used), because Direct Software Sales people are sales people and rarely really understand the software and licenses needed for your project. Resellers are committed to your success – after the contract is signed, they will still be working with you, whereas the Direct Software Sales person will most likely be assigned a new territory of accounts right after you sign.
2. Time to Buy – Software companies are famous for the quarter end discounts because their bonuses are based on the quarter. So find out when the quarter ends for the software manufacture and plan accordingly.
Secret 3: Resellers often don’t care about the quarter end and are willing to give you the great deals all year round.
3. Sales Tax –Did you know not all software is taxed? Many software companies will automatically charge you sales tax because it safe. They don’t have to keep up with the ever changing state laws and clients don’t usually question it.
Secret 4: Many states have loop-holes that allow you to avoid sales tax on major software purchases. For example some states don’t tax software if the client never receives media (ie CD, Disc or Tape). In those states, you want to make sure the vendor only lets you download the software and doesn’t send you a CD. Illinois has a five part test to determine if a software purchase is taxable, so you want to make sure your purchase contract meets the five part test of Title 86 Part 130 Section 130.1935 of the IL Revenue Code. Do your homework as state rules are ever changing as states scramble for funds. But the 7-10% savings on your purchase makes the research time worth it.
Stay tuned as our next posting will cover 4 more tips and secrets on how your organization can Save Money on BI Purchase