Vendor Negotiations: 5 Cost Cutting Tips
Economic recession and its anticipated budget cuts drive need to save money wherever you can. These tips will help you negotiate and renegotiate vendor contracts and lower your costs.
Thu, November 06, 2008
Network World — Saving money is top-of-mind for most IT executives these days. In fact, six out of ten CIOs are trying to lower costs in 2009 by renegotiating IT vendor contracts, according to a survey by the CIO Executive Board. Here are some quick tips, culled from our discussions with senior IT leaders, for saving money on technology contracts.
- Even if you're bound by a signed contract, remember that you have leverage. The contract will end eventually, and vendors know you'll be less likely to renew if they aren't cooperative during the length of the contract.
- Negotiations can be contentious, but they don't have to be. Be professional and explain your business problems and the reasons your organization needs better pricing.
- Be flexible. Vendors usually aren't willing to cut prices unless there's something in it for them—such as a contract extension.
- If a contract is set to expire in six months or less, gather formal bids from other vendors. Then either switch vendors to get a better deal or use the bids to convince your existing vendor to lower its prices.
- For new contracts, negotiate terms and conditions that give you the right to drop or reduce support; these will allow you to lower costs later.