Posts Tagged ‘IT negotiation’

IT Buying behaviour

March 29th, 2010

In recent weeks we’ve been asking our clients about how the recession has impacted their IT spending. Not surprisingly, the majority noted that they are enduring a reduction in their IT budget. Interestingly, other comments included a noticeable slow down in the decision-making process as management reviewed every spend request in more detail than ever before. And total cost of ownership is now analysed in more depth too as recent history has shown that TCO often ends up higher than expected. Reducing IT costs through virtualisation, supplier rationalisation and canny contract negotiation are still being pursued as savings vehicles. And Silver Bullet Associates is happy to report that our contract negotiation advice  continues to help businesses obtain lower prices and better contracts.

Software contract negotiations; anticipate change and get protection

March 23rd, 2010

To engage in successful software contract negotiations, businesses must rigorously assess their needs and requirements, understand their providers’ strengths and liabilities, and anticipate change. Software contracts are often written to favour application providers and phrased in vague, high-level language that can make companies vulnerable to additional fees or fewer usage rights than customers anticipate. Introducing additional complications, change is the only constant in today’s IT environment. Mergers and acquisitions are the norm for companies and their service providers; business models, such as the progressive migration toward outsourcing and globalization, are continually evolving. Consequently, companies must approach contract negotiations as a strategic element of their business life cycles. After doing the necessary homework, a company might decide that a new, marginal or small application provider supplies the most-appropriate technology for its requirements. This presents the nagging question, “What happens if this provider becomes unable to abide by our service agreement, or worse, goes out of business?” As “insurance” against such a conundrum, customers are increasingly investigating software escrow agreements, wherein they have their software’s source code stored, either through the provider or a third party.

Negotiating basics

February 21st, 2010

Continuing on from last week’s theme, we’ve had a few comments asking for some more negotiation Quick Tips. So here we go:

1/ Always separate the people from the problem

2/ Focus on interests not positions

3/ Generate options before you start, and then continue to generate new options as the negotiation develops

4/ Don’t be too rigid; aim to be flexible

5/ Be aware when the time requires assertiveness, or passivity, or manipulation or aggression

6/ Know what you want

7/ If you don’t ask, you don’t get

8/ Find out what they want

9/ Control the time; you decide what happens and when

10/ Ask Silver Bullet to coach and mentor you if you feel unsure about what to do or when

Remember; negotiation is fun, negotiation is good, and negotiation makes the world go round.

Some quick tips to help you negotiate better deals with your IT suppliers

February 15th, 2010

Purchasing IT and associated service agreements can be daunting for any business. Mark Bartrick, Managing Director at Silver Bullet Associates advises businesses to be careful. At a recent IT Forum dinner, Mark was asked to outline some quick tips on how to successfully negotiate IT contracts.

If a business lacks IT negotiation experience, turn to a consultant. 
Consultants like Silver Bullet Associates can save businesses a lot of time and money because they have ‘been there, done that’ before.  

Remember that all contracts are negotiable.
While a vendor might say a client is getting its standard contract, it is only standard because the vendor says so. If you don’t like it, negotiate a better one.

When it comes to pricing, the devil is in the details.
Itemise bundled pricing. Demand clarity of discounting. Spread payments out. Just like working with a home contractor, paying for everything at once can reduce leverage with a vendor if there’s a problem later. Also be sure contract cancellation policies are clear.

Be creative and persistent in efforts to lower prices.
If the sales rep can’t or won’t lower prices, ask who has the authority to do it and go to him or her.

Don’t accept the first price they offer.
You’ve got to push as hard as you can without destroying the long-term relationship.

Consider signing a multi-year contract in certain cases.
For emerging technologies, it may be better to go year-by-year, but for some software, a multi-year contract makes sense to get better pricing.

Get information from peers.
Talk to other businesses; compare notes on products and vendors.

Spell everything out.
Although it’s more work, put “deliverables”—specifics of what a product will do at what time—in the contract. It can even include consequences if the products don’t perform as expected. A service-level agreement might say, for example, that for every hour a server is down, the vendor credits the client money.  

How to become a great negotiator

November 16th, 2009

Just Ask for What You Want. Don’t be Afraid to Take Risks. Thoroughly Prepare. Leave Your Ego at the Door. Listen Intently. Be Prepared for Surprises. Leverage Your BATNA (Best Alternative to No Agreement). Avoid Argument. Don’t be afraid to Walk Away. Clarify Expectations. Separate People from the Issues. Discover Your Opponent’s Motivation. Never Make a Concession without a Trade-Off. Be Bold. Role Play Negotiation Situations with Colleagues. Aim High. Be Organized. Ask an Expert Negotiator to be Your Mentor.

Using emails, letters and faxes to Negotiate

November 9th, 2009

There are many times when it is better to negotiate using an email, fax or letter.  Lawyers do it all the time.  Put your initial offer on paper and don’t let them see the smirk on your face.  Negotiation letters, emails and faxes can have the advantage of being cold and emotionless and they can mask your real emotions to your benefit.  Depending on your situation a little personal separation from the conflict could help turn the tides. Using letters, faxes or emails, allows you to have more time crafting your message.  If you are a naturally amiable person, then face to face negotiations may not be your strong suit. While using letters, faxes and emails to negotiate can be the right tactic, don’t use a letter when face to face would be better.  Letters should be used when they are an advantage, not to avoid conflict.  If avoiding conflict is your goal, take a look at why you are afraid. 

One supplier too many?

October 26th, 2009

Mark Bartrick, MD at IT Negotiation Advisors Silver Bullet Associates says “end users approach the buying process in many different ways”. Some opt for a single supplier – the so-called “one throat to choke” strategy. Others buy from multiple suppliers to keep everyone honest. Most feel the multi-supplier approach is the way to go, but it’s a slippery slope. How many suppliers does it take before the pros outweigh the cons? Having too many suppliers on hand can dramatically increase cost of management and reduce overall efficiency. Negotiating a better price is always a balancing act. Suppliers often give deeper discounts to those who buy more of their stuff. So, while negotiation power can be improved with competition, actually buying from many suppliers can limit volumes and therefore discounts over time. Bids should be competitive, and exit strategies considered, but it makes sense from a pricing perspective to pool purchases with a smaller number of suppliers once the negotiations are done. No two environments are the same, but a good rule of thumb is to have no more than three different suppliers for any given product or service to keep costs under control and minimize complexity.

Single source supplier? Tips and Tactics for negotiation

August 24th, 2009

Negotiating with a single source IT supplier can be very challenging. There have been several threads on this subject recently on LinkedIn and many suggestions put forward as to what buyers can do to mitigate the issues and still come out with a good deal. Combining some generic suggestions together with our own thoughts, we have listed below some tips  and tactics that may help you when faced with this situation:

  • Timing of the deal. Find out when your supplier’s financial year end and quarter ends are. Even single source suppliers have sales targets and deadlines, and this can be leveraged in your favour. 
  • Identify what goals your supplier’s salesman may have. It might be a certain level of spend, or a deal cut in a certain way that maximises their commission. Find this out and you may get some leverage over how much you spend and how.
  • Maintain a competitive spirit even though there may be no other option but to buy from the single source supplier. You always have the ‘do nothing’ option up your sleeve. But there may also be different ways of satisfying your business requirement without having to buy anything from the supplier that can be used to leverage a better deal. 

Some people call negotiating with a single source supplier a ‘buyers nightmare’. It need not be if you follow the above ideas and think outside the box.