If you look at a large IT procurement deal comprehensively and objectively, its most crucial factors go far beyond a specific set of a given department’s needs. Yet vendors’ sales representatives are highly trained to identify these needs and to sell “solutions.” And to the detriment of their bottom lines, flexibility or sanity in contracting issues, many customers believe that the needs of their departments or functional areas are the only important factors.
To do the best deal for your organization, you must consider that whatever you want to buy is just one part of a package. For example, a vendor’s representative says, “Our equipment can handle your problems by providing these solutions, and it’s within your budgetary constraints. We can deliver the entire system, within your time frame, and the system will provide a more than adequate performance level. Can we do business?”
If these are your main concerns, your response will most probably be yes. The vendor’s representative then hands you a letter of intent and says: “Great! Sign here and we can get going.” You sign because your primary concerns at that time are the four or five areas that the vendor has so carefully targeted. Good deal? Many times, the answer is no.
Although a given department’s needs are important, they’re often only a subset of a wide range of issues involving contractual, financial, operational, technical, procurement, end-user and senior management requirements.
Unfortunately, department heads, project leaders and end users often find out later that in their haste to satisfy only their needs, they overlooked some extremely important enterprise wide issues. For example, they may have paid more than they needed to, neglected to secure adequate contractual protection or done something that’s incompatible with technical standards or long-term corporate goals. In essence, the customers may find they were sidetracked by a bad case of tunnel vision, compliments of a great sales job by the vendor’s representative.
This micro view of the acquisition has a number of variations. The speed-of-doing-the-deal obsession during the Internet craze played right into this problem. A noticeable number of customers suffered vendor performance shortfalls – stern reminders that haste makes waste. They didn’t get what they paid for because contractual assurances “took too much time” in the rush to get AI deals done.
In some situations, a vendor uses a financial concern to persuade the customer to sign up. The customer’s CFO is searching for some impact to the bottom-line profit. So, an astute vendor structures a managed services deal or lease deal to provide massive, short-term financial benefits with very inflexible terms that lock the customer in for a very long time. In doing so, the customer surrenders future technological agility and options.
The solutions ploy is easy to overcome if the customer can resist buying on impulse. As any retailer will readily acknowledge, impulse buying is an important factor in retail consumer sales. Regardless of whether impulse buying is an appropriate justification for purchasing a new tie or a hanging plant, it shouldn’t apply to the acquisition of a multimillion-dollar system. I’ve seen too many deals done too quickly with too little thought or analysis.
Most important, a broad-based negotiating team should be used to collect and prioritize a comprehensive set of negotiating objectives that represents the entire range of necessary professional disciplines mentioned above. Documenting these sometimes diverse prioritized objectives in a position paper for all team members and senior managers to sign off on is a key step in the process. Then, and only then, does your team have a consensus and a realistic set of needs to use as negotiating points.
Don’t let the bells and whistles that you believe you so desperately need divert your attention from other considerations, such as cost, contractual assurances and flexibility. If you refuse to buy on impulse, and instead use a comprehensive set of negotiation objectives, this ploy should not be a problem to overcome.
JOE AUER is president of International Computer Negotiations Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates users on high-tech procurement. ICN sponsors CAUCUS: The Association of High Tech Acquisition Professionals. Contact him at email@example.com.
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