What do I need think about when choosing a backup solution Top Tips to Remember When Negotiating With Vendors to Get the Best Deal By Spiceworks User, Darren Schoen
For many, negotiating is not part of their everyday life in IT. With this economic climate though, every dollar that can be shaved off the bottom line adds value to a company s IT Dept. Re-negotiating current contracts and getting the most value out of new ones can not only ease the pressure from CFO s to cut the already lean IT budget, it also strengthens the perception that the IT Dept is not just a cost-center. Here are some tips, in the order of importance, that I have used to successfully negotiate contracts and saved my company over $95,000 in the last two years, with several more large contracts coming up, I anticipate this number growing. 1. Know your stuff. You cannot negotiate if you don t know what you are talking about. Become knowledgeable in, at the least, the basics of whatever area you are renewing a contract in. For example, I negotiated a postal machine contract renewal. I knew nothing about postal machines, so I asked the people that used it what they liked/disliked about our current system. I did a little research (a couple of emails sent out) on our mail volume. I found out the two major players in the field and met with them personally. In the end, I was able to cut our costs by 50%, but couldn t have done it if I didn t have the knowledge of our usage and trends regarding that. There are a couple of sub-categories in this most important point: a. Know what your company needs. Talk to the people that actually use the service if you don t. Talk to other stakeholders in the organization and find out not only what they like about the current system, but what they would like. A wish list per se. What may be important to IT, may not be important to another Dept. b. Look at the intangibles. Service and Support are huge areas that often get overlooked when working on deals. Sometimes the cheapest deal is not the best deal. A deal that includes 4 hour response time to a critical service in your organization and is only marginally more expensive than a deal that charges for every service call and has a 24 hour response time may be the best fit for you. Also, look at what other services the vendors currently provide to your organization, you may be able to leverage those to the current deal. 2. Be Honest. Salespeople are salespeople for a reason, just like you are an IT geek for a reason. In the first meeting you have, cut to the chase and let them know that you are also looking at other vendors. This will add urgency to whatever deal you want to make. Do NOT try to bluff a vendor. You may be good at No Limit Hold-Em, but in the real world, they will be able to smell a bluff a mile away. The salesperson that you are dealing with knows their field much better than you and also knows their competition better. Do not pull a number out of thin air and ask them to match it if you don t have written proof of that number. In the one contract negotiation, I sent one vendor a monthly lease number only to have him try to call me on it. He said that
didn t make sense. I scanned and emailed the contract the other vendor gave me and told him that I wouldn t give him a number unless I could back it up. 3. Be the Devil s Advocate. You may be a IT person, but don t think like a IT person. When you are working out the deals, you have to think a little like a Finance person. Think about what questions that the CFO would ask and pose them to the vendors of choice. This tactic can be used quite effectively. I was able to get a 40% reduction on user licenses from a major vendor by asking the salesperson questions that I knew would be asked of me. Some questions I always ask myself and therefore my vendors are: a. What are the advantages of one proposal over another. You may not always recommend the cheapest deal for the organization. If you don t, you will need to justify why. It could be the service and support is better. It could be that you want to preserve an existing relationship with a vendor. Whatever the reason is, be prepared to communicate that to your boss. b. Why are we changing vendors. There is usually a benchmark vendor in every space. A intangible is that many people in an organization have a comfort level with an existing vendor. If you recommend a deal with a different vendor than one you currently use, especially if that vendor is not the benchmark one in the space, you need to be able to justify why. The vendor may be cheaper, may give better service or a myriad of other reasons. Be prepared to back up the decision with testimonials from current users of the vendor and you should ask the salesperson to give you names and emails of current customers. 4. Get it in writing. Verbal contracts and written contracts are both binding, but you cannot use a verbal contract effectively for negotiating. After the first meeting, I stress all communication be done via email between myself and vendors. Have vendors email you a contract or quote. This then can be used to send to other vendors to see if they can match it. 5. Don t hesitate to provide full disclosure. I ALWAYS have at least two vendors for every contract, period. And when one quotes me, I send that number to the other one to see if they can match it. For a certain contract, I was quoted a VERY low number from one vendor. Our vendor of choice was hesitant to accept that as a real number. As stated above, I scanned and emailed the contract I got. As a result, they brought their price down to comparable levels therefore saving the Organization thousands of dollars over the life of the lease. 6. Always have more than one vendor bidding on the contract. Even if you have no intention of using a second vendor, having them bid on services is paramount to driving down the final price. In one contract I worked out, one vendor quoted me a very low price, now we had no intention
of using them as their product didn t fit our needs (see first point), but I was able to use that number to drive down the final price on the vendor that we did use. 7. A Vendor s first proposal is never their lowest price. This is a big one. Never, never assume that the first proposal from a vendor is their lowest price. In buying some hardware, I got a quote from one vendor, and then through some contacts I had, got another quote from a different vendor that was over $1000 less per item we were purchasing. I sent the lower quote to the initial vendor and he was able to match that price, saving us considerable real dollars. This is why you always get a minimum of two vendors bidding. 8. Be willing to close the deal right away. When negotiating, absolutely be willing to close the deal once you get the best quote. Research is research, but if you drive down the cost of a contract, the salesperson is assuming that you want to close the deal. This does a couple of things. It keeps the respect between you and the salesperson and also adds urgency. If you drive down a price, and then say that you were just researching, you have wasted their time and yours as well. They will be less likely to deal in the future. 9. Timing, Timing, Timing. You will get a better deal at month/quarter-end than you will at the beginning of the month/quarter. Usually salespeople s commissions are calculated monthly, and they are more willing to cut deals when their deadline is looming than if they have 4 weeks to make their numbers. Also, telling a vendor that if you get a certain number you would be able to close the deal before month-end is a HUGE carrot to dangle in front of them. You will be surprised as to what they will come up with. 10. Value-Add items can sweeten a deal. Know what items that, for a vendor, are low cost but can be added to a deal to sweeten it up. Online Training is a good example. Free installation or disposal of current equipment is another. These can add real value to one deal over another. Final thoughts: With a little time and a little practice, you can effectively save your organization substantial real dollars by negotiating. But there is a fine line between negotiating a good deal therefore preserving a relationship with a vendor and being a jerk by demanding too much. 3 or 4 rounds of back-andforth between you and a vendor is about the limit. Anything after that leads to frustration on your part and theirs. You need to save money, they need to make money. A successful deal does both.
1. Know Your Stuff 2. Be Honest 3. Be Your Own Devil s Advocate 4. Get It In Writing 5. Provide Full Disclosure 6. Get Multiple Bids 7. Never Accept the First Price 8. Be Willing to Close 9. Remember Timing 10. Consider Value-Add Items