HRIT contract with a software vendor: what to be aware of.

Here’s what to be aware of when entering into HRIT contracts with software vendors

When your organization decides it’s time to switch to a new HRIT system, the journey often begins with an extensive package selection. Once it’s decided which system best suits your organization and ambitions, it’s time to sign the contract. But don’t put that signature down too quickly. You can only apply for such a budget once, so make sure you understand what you sign up for, and make clear agreements. Good contract negotiations also increase the chance of a successful HRIT implementation, within budget and on schedule, without extra stress, or unpleasant surprises. In this blog, we provide tips for negotiating with software vendors. You can read the tips for negotiating with implementation partners here.

Entering into a contract for a new HRIT or HCM system is a business all its own. Organizations often have no idea what is in the fine print, where there is room for negotiation, and whether the approach and planning is realistic. It is therefore a good idea to bring in independent expertise when entering into a contract. This not only ensures a better deal, but also that everything is clear prior to implementation, which can save you a lot of stress and misery, during and after implementation. Bas Eggelaar (founder and Managing Director) and Ruben Stavast (business development manager), who are both from SuccessDay, have noticed a growing need for support in HRIT contract negotiations. As part of a larger service package, but also as a separate service – possibly on a no cure, no pay basis. In addition, they also advise on contract renewals.

Because the two have years of experience with HRIT implementations and have conducted many contract negotiations themselves, they know the ropes. In this blog, Bas and Ruben explain what you need to consider when entering into HRIT contracts with software vendors. Ruben: ” There are usually more options than organizations think.”

Recommendations for HRIT contract negotiations with the vendor

Bas and Ruben have 4 important recommendations for negotiating with the software vendor of the HRIT system you have your eye on.

Pay attention to the scope

Make sure that the modules you buy are in line with what you have in mind. When requesting a quote, organizations often start with a huge list of requirements. The response is often that the sky is the limit. But this does not necessarily mean that everything you have thought of in advance is actually included in the modules you buy. The Wet Poortwachter (Eligibility for Permanent Incapacity Benefit Act), for example, is something specifically Dutch that is not customarily included in the systems. Bas: “You wouldn’t be the first person to suddenly discover, after signing the contract, that you have to buy a separate module or plug-in for this.” According to Ruben, customers tend to assume something based on what they are shown in the pre-sales process. ” Everything that is possible and beautiful is presented in the demo, but this is never the standard product.” So, when you are presented with a contract, check the scope carefully, and check whether it meets your specific needs.
What about connectivity?

All vendors say that their HCM, HRIS or HRIT system can be integrated with just anything. But the question is, how? How does it link to other systems? Are the costs included for this? Who will build the links, and who brings that party on board? And finally, who is responsible for maintenance? Check this out and make clear agreements.
What determines the price?

The software price is often determined based on the number of modules you purchase, and the number of employees. Nice to know: some vendors are willing to offer a reduced price if, for example, your organization has many production employees who will not use the full functionality. In general, the more modules you purchase, the more discount you get. Even if you don’t go for a major implementation, it can still be interesting to buy everything at once. Bas: ” You might be paying for something for a year that you are not yet using, but you will still be paying less than if you buy it piece by piece. Get this estimated.” It is often a matter of a lock-in strategy: the vendor knows that a customer will not be leaving quickly after such a large expenditure. This is why it is important to negotiate thoroughly from the start. See whether you can negotiate a more favorable contract with a longer term, or agree on the maximum percentage increase for a contract extension. Another piece of advice: know the end of the vendor’s quarter or fiscal year because that’s when they are generally willing to offer higher discounts.
Don’t underestimate training

Training is often an underrated part of HRIT projects. In a contract there is always something about training included, for example: ‘You get 2 training credits per module’. Customers tend to think: we’ll do the training courses later on, during the project. But by then there is often no time left. Do this beforehand, so you have the basic knowledge in advance. Otherwise, you pay for training courses that you haven’t followed and that is a waste of money.

In short: there is enough to think about before you sign an HRIT contract. Bas: “You can only ask for a budget for a project like this once. It’s like renovating your house: it’s not bad to have 2000 euros left over when you’ re done. Better than the other way around, because that would mean a sudden cancellation of the skiing vacation you had already planned.”

Sometimes there is no room for price negotiation, but there are still bargains to be made: extra training credits, or a small extra module. An external negotiating partner knows where there is room for negotiation because they are familiar with all the parties involved. Ruben: “We do more than shout, ‘It has to be cheaper!’ We ask all parties whether everything is clear to everyone. It is in the interest of all parties to fully understand the quotation. Make sure you know what you are signing up for. With good expectation management you get a much smoother implementation: fewer change requests, less delays, less grumbling, less stress and — last but not least — there is an excellent chance that you will stay within your budget.”