One of the more important issues when I advise IT buyers is their basic attitude toward contract negotiations. In many situations, the end user or senior management has a friendly, close relationship with representatives of the vendor. The vendor is referred to as their partner, friend or the one with the solution to their problem. As a result, these stakeholders, who must protect their company’s interests, can be less than objective in analyzing the vendor’s proposals, promises and provisions.
Whenever I brief the key players on the customer’s negotiating team, I use the following “attitude adjustment” points, which are useful for all of us:
• Negotiations begin when the first person in your organization exchanges information with the vendor. You gain or lose negotiating power with every succeeding interaction.
• The customer is the buyer, and the vendor is only the potential supplier. You’ve got what all the vendors want – the money.
• Change your “needs” to “preferences.” Needs aren’t negotiable; preferences are. Don’t tell a vendor you need it, its product or its service. Just say you prefer it.
• At negotiation time, the vendor’s sales representative has projected to his management that the deal with the customer has already been sold. Use this to your advantage, since the sales rep has placed the pressure on himself to close the deal.
• Vendor reps face many pressures to reach certain sales goals at various times, such as quarterly, annually or when earnings are down. Be aware of these pressures.
• Vendors will try to exploit almost any sense of urgency. Remember that haste makes waste, unless your side is the better prepared, has alternatives and sets a deadline that’s to your advantage.
• Generally, it’s to the customer’s advantage when vendors bring in their top brass, as long as the customer is unimpressed with warm-and-fuzzy talk about relationships and places on the agenda substantive negotiation points to address with the vendor’s executives. They have more to give away than the sales reps do.
• Never rely on vendor promises and benefits unless they’re written in the contract, and hold the customer personnel who trust those promises accountable.
• Vendor shareholders and senior management are primarily interested in bottom-line profits and allocating risks to the customer, not interpersonal relationships. Don’t rely on these relationships; vendors just use them to get what they really want.
• Multiple acquisition methods (leasing vs. purchasing, short- vs. long-term contracts) should be considered in most cases, though vendors will try to give you tunnel vision that benefits their current performance objectives.
• The customer does have alternative vendors, approaches and deal timing, and both sides should be aware of that during negotiations.
• Vendors must be aware that negotiations will end only when the customer is fully satisfied and the agreement is fully documented.
• Ignore a vendor’s claims, especially early in negotiations, of “That’s the best deal we can give you.”
• If you haven’t heard a no from the vendor or haven’t experienced a deadlock, impasse or some sort of breakdown in negotiations because you asked for too much, you haven’t gotten the best deal you can get.
• Remember that negotiations are enhanced by thorough planning, knowledge, teamwork and dedication to securing the best contract protections at the best price.
• Most important, remember that competition is your strongest ally. Don’t select a vendor until you’ve gone through competitive negotiations on everything, including the contract, with at least two potential vendors.
You and the rest of your negotiating team should keep these points in mind and review them like you would review a checklist before each negotiation. After all, other professionals, like pilots who have been flying for 20 years, still review their checklists before takeoff.
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 firstname.lastname@example.org.
Copyright by Computerworld, Inc., 500 Old Connecticut Path, Framingham, MA 01701. Reprinted by permission of Computerworld.