In Negotiating Licenses, the Rules Favor the Publisher

arm-wrestleMany Palisade clients are technical experts, and when we work with them, they provide excellent information about their use of software. They then point us to where in the vendors policies “all the business answers” lie.

This is called ‘negotiating with scientists’ and I love it.

Early in my career, I negotiated research contracts with prestigious scientists and their institutes. A couple of them were Nobel prize winners. I learned very early that I could present our book of rules, and their intellects would start turning to find maximum advantage allowed within the rules. They were quite creative in their interpretations, and I often allowed their counter-proposals…

…because every negotiation started, and then stayed within, the parameters that I allowed. I set the rules, and we could fiddle about with them all day long, but they were still my rules.

I see the same thing at Palisade when advising licensees who have a purely technical context. Yes, the software publisher has tremendous leverage, and most of the time business is done on their terms. But not all the time.

Some examples:

Intellectual Property ownership – customers increasingly put in their templates that they own all of the IP created for, under or around their contract. It is a very foolish (and short-lived) software company that allows customers to ‘own’ their IP! This is an area where the publisher’s policies can (and should) guide the discussion. Thus the scientist is correct in learning the limits of the publishers rule book.

Payment – this is a business term, and other than certain regulatory impacts (like revenue recognition) there is nothing set in stone about it. This is an area where enlightened customers might start to think outside the box (or book of rules.) If the publisher refuses your terms, is there a reseller who might bridge the gap?

Golf Tournament – this sounds ridiculous, but when a software publisher was invited to participate in a golf tournament, the other companies were so used to following their rules that when the publisher dictated terms as ‘our standard event policies’ the other companies complied with almost no argument!

This can be dangerous advice, because big publishers use all the tools of the negotiating arsenal to punish customers who ask questions. They delay, often for months, then issue an abrupt ‘no’ from headquarters with no ability (or time remaining) to discuss. They create fear among customer technical staff that they will not get the latest & greatest because ‘your CIO is asking a lot of dumb questions’. They use their quarter-end pricing policies to trigger a panic-buy mentality among their customers.

All of these work because customers fail to understand what leverage they have, consider alternatives, and spot where there is (occasionally) a real opportunity to approach negotiations from outside the vendors rule book.