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.

One of the basic rules of negotiation is to be very clear about what your ‘walk away’ position is. It is rare indeed that you enter a negotiation knowing that there is no alternative but to get the deal done right now at any cost. There is always some flexibility on both sides. And as an IT buyer, you need to be very clear about your alternatives which often include competitor offerings as well as a ‘do nothing’ scenario. Sometimes, when an IT supplier is playing hardball and is not offering a clearly competitive price or demonstrable value for money, then as a buyer you need to have agreed with your IT stakeholders where you draw the line between doing a deal at a reasonable price or walking away if the suppier doesn’t step up to the mark. Some IT negotiators feign ‘walk aways’ to test a suppliers resolve. But canny suppliers have seen this tactic so often and if they’ve done their homework they will know that it is purely a procurement play and not a real issue. Sometimes you do actually need to walk away and stay away. It sends a strong message that you won’t accept unreasonable deals. So always prepare, plan and define your walk away point before engaging with your chosen supplier.

IT budgets are facing a painful overhaul in 2009 with many analysts predicting that global spending on IT products and services would drop by 3% or more this year. This would be the first annual decline since the dot com crash seven years ago. Spending priorities would seem to centre on business optimisation technologies, particularly business process improvement and business intelligence. And while reducing enterprise costs will factor in most IT plans in 2009, its also worth noting that as cash becomes scarcer, its buying power increases.  As IT suppliers scramble for a diminishing pool of money,  your negotiation power increases. At Silver Bullet Associates, we suggest that perhaps this is the year for you to review your current IT costs and tackle some of the more expensive items head-on by re-negotiating better prices or terms with your incumbent IT suppliers?