5 Can't-Miss Vendor Negotiation Tips
If you work with vendors and wonder how to get a better deal, these tips can help you learn more about the process, add value to your contract with any vendor and put you in the driver's seat.
Wed, February 18, 2009
CIO — These are tough times for IT. There are less people and resources to get things done, budgets are shrinking and everyone still expects the same levels of service and functionality. Something has to give. With budgets being so constrained it's even more important than ever to get the best value for every dollar spent. Even in this tough, budget conscious, economy there are still some purchases that must be made, services that have to be paid for and maintenance contracts that have to be renewed. So how do you ensure that you are getting the best deals possible from your vendors?
There are the obvious; we all know the best time to get the best deal from the vendor is the end of the quarter/end of the year but there are more things we can do to make even those deals better. Here are some steps to ensure you are getting the very best pricing on your IT expenditures:
1. Get the Right People Involved
In today's complex world, the ability to both negotiate a contract and have a firm grasp on the technological needs involved are both crucial to a successful negotiation. The person negotiating with the vendor can be at a significant disadvantage if they do not understand the intricacies of the technology and may not be aware of what they might be giving up. Negotiating software licensing, maintenance and other technology contracts are totally unique and very different to other types of purchases and agreements. Likewise, the technical person who knows the technological demands may not have the necessary negotiation and procurement skills. They may not be comfortable with the negotiation process or have limited experience. Make sure that whomever is talking to the vendor has both skills, even if it means getting outside help.
2. Fear, Uncertainty & Doubt (FUD)
Vendors have become impervious to the techniques of intimidation and abuse. Salespeople have become accustomed to being blamed for everything by their customers and their own management team. Intimidation is not an effective tactic for someone who has learned to roll with the punches. The harsh tactics of the traditional hard-nosed procurement and negotiation methods no longer work.
What makes salespeople really uncomfortable is the unknown: not knowing where they stand and if there are alternative solutions that are undercutting them. A more effective method is to build uncertainty. "We're considering alternative solutions/methods/partners etc." doesn't say much but gives you leverage. Avoid giving out to much information, hint at competition or alternatives but don't threaten. Be as vague as possible and let them imagine the worst.