Information Asymmetry – The Bane of a Balanced Negotiation
Information asymmetry is the imbalance in information on the buyer or seller side in a sales/purchase transaction. In the software category, this is more prevalent than anywhere else due to the inherent complexity of big ticket software deals. Software buyers often find a large knowledge imbalance when it comes to negotiating with software suppliers. This includes such factors as
- insufficient demand clarity around the software products, features and options that are required by the business over the agreement term
- commercial complexity around the licensing and support or SaaS subscription agreements
- complexity around the licensing model, metrics and usage regimes
In addition, stakeholder communication and alignment with internal sanction processes require the large software deal to be planned well in advance so as not to fall at the last hurdle by running out of time.
Software procurement knowledge and expertise doesn’t come easily – the software market is dynamic and complex and supplier business, services and licensing models are often unique and subject to unrelenting change. Sometimes, it is difficult to know where to start with large software procurement projects.
However, understanding a core set of market and vendor fundamentals and using solid, well-tested and consistent procurement techniques will provide the basis for confident engagement with the supply market – and consistent value delivery.