We mentioned in a prior article discussing How Maintenance Management Affects Trends, that pricing for EAM/CMMS software packages vary greatly as it is dependent on a multitude of factors. This can be sort of intimidating for the inexperienced buyer and it makes it very difficult to measure the value of the product against the needs of your organization. Before we outline some useful negotiating tips let us be clear, the price should not be the reason you have narrowed down your vendor list. First and foremost, when choosing a vendor, is to determine the need for your company and what type of solution will best address the pain. Decisions based on price alone will only bring frustration throughout your company and probably some unwanted scrutiny on your decision-making abilities.
Why Negotiate Your EAM CMMS
In a perfect world, you and the vendor would naturally agree that you will get X in return for Y. A handshake seals the agreement and business is done. However, the reality is little more complicated. Purchasing an EAMis more than just receiving a set of disk and reading an instruction manual. There is work to be done on both sides to ensure the software is implemented correctly. This may include understanding the EAM work flow, training needs, customization requirements and the desired timetables for installment. What must be negotiated is the value assigned to each of these components as well as the determination of accountability (who will do what).
Negotiation is important for several reasons which include but are not limited to:
- The willingness of a vendor to negotiate is a very strong indicator of the value they place on your business. Similarly, your willingness to negotiate indicates the type of client you are likely to be. The more difficult a client is likely to be the higher the account maintenance costs will be.
- Negotiation builds the relationship, enhances communication, allows for faster issue resolution and reduces nickel and dime frustrations.
- Negotiation builds respect when done properly.
Points of Consideration
An EAM will become an integral part of your asset management by helping you to manage assets from the planning stage through the eventual asset retirement or replacement. Because of this, there are numerous points to consider when seeking a vendor partner for your facility. Some of the more notable points you should consider are:
- Software as a Service (SaaS) vs. On-Premise? The key is to find the balance between internalization and practicality. Two common choices are:
- A hosted SaaS, this is when the EAM/CMMS software is run on the vendors equipment and is accessible through a web browser. This SaaS solution makes it easier for the vendor to maintain updates. Subsequently, data center and other support cost are built into the pricing. However, the costs for a SaaS CMMS or any SaaS solution has significantly lower IT financial outlay.
- An on-premise solution where the purchasing facility hosts the software on its equipment. The customer may incur additional costs for server software, SQL database, networking or backup/redundancy plans. This places all the burden onto the customer. When choosing this option make sure your IT department is sufficiently strong enough to implement and maintain the increase in work. If it is not then a hosted CMMS may be a better solution.
- What are the project management variables? These variables cover analysis, consulting and customization needs. Best of Breed vendors will provide these services at a cost as they required skilled professionals. Buyers should not expect these services to free but can minimize the expense by understanding their workflow and knowing what is needed from reports to design of use.
- How much EAM system training will be required? EAM/CMMS systems are powerful tools but there success as a tool is dependent on their ease of use, an understanding of how they work as well as measuring the results. Training is needed for administrative staff as well as the end users. A lack of training will result in lower adoption rates and limited utilization resulting in lower than anticipated results.
- What hardware will be needed? A SaaS solution may only require the purchase of mobile handheld devices (a must for most facilities), in contrast, an on-premise setup may require addition servers or storage capacity. In addition there is likely to be a higher internal IT labor cost associated with the implementation of an on-premise solution
Every facility is different, has unique needs and is managed differently. The correct solution is one that best addresses the organizations needs as a whole. Vendors have adjusted to this by offering a variety of packages. Prudence and due diligence are the buyers best friend.
There are countless books on negotiating and the art of securing the best deal possible. The more enlightened approach is to understand that if both parties do not feel there is a win-win a long term arrangement is ultimately doomed. A negotiation is an agreement to form an alliance (regardless of length of time). Some useful tips are:
- Do not draw lines in the sand, everything is negotiable.
- Negotiate on value not price. Both parties have a gross profit margin or ROI to achieve.
- The Devil is in the details – know the details of what you are agreeing to. Do not rely on an outside party assurances. Make sure you understand the ongoing costs for maintenance , upgrades and training. The object is to avoid surprises.
- Involve people who understand the business you are in in the negotiations. An EAM/CMMS system affects the entire company, hence, someone who understands the value an EAM system adds and how it will change the workflow is very important.
- Have the negotiations completed (agreed upon) before sending contracts to attorneys for review. The less work they have to do the less expensive and faster implementation can begin.
There is an old adage that says “nothing ever goes according to plan.” The most notable deal breakers are a result of not following the tips above. These include:
- Making unreasonable upfront demands such as freebies or discounted pricing will have the vendor walking out the door.
- No flexibility in pricing schemes. For example, insisting the client accept a user named license structure and not recognizing that a concurrent user based schedule maybe more appropriate. All pricing options must all be on the table.
- Letting attorneys work out the details if using outside council. This will drive up costs and can possibly change the dynamics of the deal.
Concluding The Deal
Signing an agreement is just the beginning of the process. Vendors and buyers should feel they are in a partnership together. When both parties feel like they have accomplished their objectives you have created a win-win situation. The sustainability of every vendor is dependent on the successful use of their software. Tell us what you would like to see when negotiating for an EAM/CMMS.
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