Does an ERP vendor’s fiscal year matter in the discount you
get as a customer? Absolutely. Oracle’s fiscal year ended in
May, and Oracle’s salespeople are notorious for pressuring
customers into signing deals with significant discounts prior to
year-end under the notion that the discount will disappear after
the year-end. Customers need to take into consideration the
vendor’s year-end and its impact on the vendor’s
willingness to provide discounts. However, only focusing on
year-end discounts is misguided.

While it is true some discounts will no longer be available, it
is unlikely that the vendor will walk away or that all discounts
will disappear. While a salesperson may want to close a deal prior
to the year-end, salespeople are under constant pressure to make
their numbers. In our experience, the discount being offered as an
incentive to sign by year-end will change, but it is unlikely to
disappear entirely.

Moreover, buying around a vendor’s year-end is not the most
effective strategy for securing meaningful discounts. Customers
should be methodical and creative to properly motivate sales
representatives to achieve the discounts and concessions the
customer seeks while focusing on managing the cost of operating the
ERP system over the lifecycle of the customer’s relationship
with the vendor.

While focusing on upfront discounts, price caps, future options,
and the ability to swap out functionality are all important,
focusing on flexibility helps reduce the likelihood of a breach of
the contract, reduces the likelihood of an audit, and reduces the
cost to operate the ERP software over time. Instead of only
focusing on upfront discounts, customers should focus on obtaining
the greatest amount of flexibility in using the software. The goal
should be to minimize unexpected fees and costs. A customer also
needs to think about the cost of hardware required to use the
software, the training needed to use the software, and any changes
required to the customer’s infrastructure to use the
software.

ERP vendors do not play fair. The discounts they offer are
heavily tilted to favor the ERP vendor over time. The goal is to
get you to sign, and then sell you as much software as possible. As
a customer, it is important to assemble a negotiation team, focus
on specific aspects of the deal, and negotiate the contract so that
the contract is tailored to your business needs.

Understanding how to utilize a vendor’s year-end during
negotiation can be a useful tool, but focusing only on upfront
discounts is short-sighted. A focus on upfront discounts will most
likely cost a customer more over the lifecycle of the software
product vs. a focus on flexibility.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.