Creating a “win/win” in negotiating software agreements

January 20, 2010

I had an opportunity to catch up with Jeremy Aber over breakfast this morning. Jeremy is a Senior Advisor to OpenView Venture Partners and provides value-add legal services to our Expansion Stage portfolio companies. Jeremy runs his own IT focused law firm, the Aber Law Firm, and has over 18 years experience in technology and corporate law. He previously served as General Counsel and Vice President to ScriptLogic Corporation, a Windows software tools vendor; and the Head of US Licensing for BMC Software, a Fortune 500 enterprise software vendor. In addition, Jeremy began his career as a Corporate and Finance Associate Attorney at Mayer Brown, a global law firm.

Our discussion centered on the contract negotiation process and how this is generally handled by Expansion Stage companies, in particular, the relationship between sales and legal, i.e., roles, negotiation process, and creating a “win/win” scenario.

It has been my experience in contract negotiations that sales views legal as a necessary evil. I often hear from sales that “legal does not share the same sense of urgency in getting a deal done or legal is more interested in “risk mitigation” then trying to work a “win/win” scenario”. Granted, this is exaggerated a bit, however, the point is that the interests of sales and legal are misaligned in the negotiation process. This often results in mistrust and difficulty in getting the next deal done.

In order to avoid a total meltdown between sales and legal and to improve the negotiation process (close rate), Jeremy and I discussed a need to have clear role definitions and a well defined negotiation process. For example, it is the role of legal to clearly understand and address the customer concerns, assess the legal risks, and maintain neutrality. It is the role of sales to align the interests of both parties and establish a “win/win” scenario. 

I recall during my earlier days at Microsoft sitting in a room with Steve Ballmer (executive sponsor) and the CIO of AIG drawing a “T-square” with positives and negatives of the deal. Interestingly, this was the best way to align the interests of both parties and ultimately helped us to achieve a “win/win”. It’s similar to a term sheet serving as the framework for legal or definitive documents in the investment process. 

Jeremy and I then went on to discuss various best practices and agreed that the single, most important way of increasing your probability of success is to align “executive sponsors” on both sides of the fence. Often, companies will assign junior attorneys to the negotiation process to prove how effective a negotiator they are. Many times, this ends in a “lose/lose” scenario and generally backfires somewhere down the line. Whenever both parties arrive at a stalemate, executive sponsors can be helpful in removing road blocks and accelerating the negotiation process.

To assist our Expansion Stage companies, Jeremy has developed a methodology for streamlining and simplifying the revenue generating agreements and negotiation process for IT based companies, and helps his clients, among other things, to increase their revenue by trying to shorten the contracting process. This is also one of the several value-add initiatives he often helps the OpenView portfolio companies with as part of OpenView Labs, as growing revenue often involves significant contracting challenges.

Are you achieving “win/win”?

Key Account Director

Marc Barry is an experienced sales leader in the Enterprise Technology Industry including Software, Cloud and Consulting. Currently, he is the Key Account Director at <a href="">Oracle</a>. He was previously a Venture Partner at OpenView.