Definition of Negotiation "reaching the most satisfactory outcome for ALL concerned" |
Negotiating Technology Contracts
Have you ever tried to negotiate a deal for software, computer equipment, or consulting services with a technology company? The task can be daunting. Unfortunately, the sales forces of most IT companies are armed to the hilt with techniques to get the best deal for them, and not necessarily the best deal for you. And even worse, most of us computer folk (like myself) have never been trained in the art of negotiation, so it can be difficult to spot a snake in the grass. Before you begin negotiating a technology deal, know what you're getting in to. Solicit, Don't Be Solicited I receive at least three calls each day from technology vendors interested in selling something: hardware equipment, software tools, consulting services, etc. Usually, these calls are "cold". My name somehow landed on a telemarketing list in the hands of some vendor who is calling me out of the clear blue sky hoping that what they sell somehow matches what I need. You can waste hours on the phone letting some non-technical, script-reading, telemarketer or sales representative chew your ear off about their latest and greatest gizmo. Very rarely do these types of calls ever translate into a real business opportunity. The most popular cold call opening is "Good morning. This is Joe from the XYZ software company. We offer break through whatever solutions to help you reduce your total cost of ownership for whatever. Let me ask you, are your responsible for managing your companies whatever investment?" I get so many of these calls that I can answer them in my sleep. Years ago, I used to engage in some level of discussion with these people and it always went nowhere. Unless you really think they've got something you might want to buy, cut them off immediately. And just like any telemarketer, they have a scripted response for anything. If you answer the above question with "No. I am not". The immediate response will be "Could you direct me to someone in the company that is responsible for whatever". If you hand out a name and number, you're just passing the buck to some other poor soul in your organization. My favorite response is "No. We don't respond to phone solicitations." Nine times out of ten, they will give up. Sometimes, the cold caller will make another run at it and re-state their purpose or as they close the call, sneak in another sales pitch. "Yes sir. I understand. We offer something really great for your company and would love to send you a free trial version at absolutely no cost. Its free to try." You could be tempted to say "Free? Tell me more." Again, this type of response will just open up the sales speech flood gates and you will be wasting your time trying to get a word in edge-wise. Stick to your guns: "As I said. We don't respond to phone solicitations." is the proper response. If they make yet one more run at it, the final blow would be "Not sure if you're deaf, but I said we don't respond to phone solicitations. Tell me your name and transfer me to your supervisor." You will either hear apologies or a dial tone. Either way, you've just gotten yourself off of a call list and will never be bothered again. If you're interested in buying something, you do the calling, not the other way around. Put The Horse Before The Cart Never begin looking for technology solutions without knowing what you're looking for. Know the business problem you're trying to solve. If you know you need a software package that automates statistical analysis, flush out a more detailed set of statistics requirements (types of model, sample sizes, etc.) before you begin to shop around. Usually, software products have bells and whistles that, although look cool, are not absolutely needed. Before you begin comparison shopping, define your basic technology and business requirements. Knowing what you really need will give you confidence and leverage in a negotiation. Always Comparison Shop No matter what, always evaluate multiple options. If you're looking for software, don't get excited and latch on to the first package that looks good. And certainly don't give a sales rep. the impression that you're overly interested in their solution. They will be less likely to move during a negotiation. The IT market is over abundant with hardware, software and services solutions. Probably, you will have many options to choose from. Be picky! Create Your Game Plan Before you begin negotiating a deal with any technology vendor, plan your negotiation carefully. I have included some general planning questions that you should answer in preparation for a negotiation. The questions I have listed below may not make sense for your negotiation, so feel free to modify them for the occasion. The point here is to prepare in advance. You don't want to figure out the answers to these types of questions in the middle of a negotiation as it may give an inch to the sales person. I would even recommend writing the questions and answers on a sheet of paper for reference. (Price) How much do you think you should pay for this software or service? What is the market rate or street price? What are you prepared to spend? What is the highest price you would be willing to pay? (Features) What key features and capabilities are you looking for? Force rank the features. What does the prioritized list look like? Of the features you need, categorize them into two categories: "must have" and "nice to have". (Service Levels) Do you expect some level of performance from the equipment, software, or service? Are there up-time requirements? Do you need 24x7 technical support? Do you expect the vendor to incur a penalty if they don't perform up to your service levels? (Trades) What is most important to you: price, features, or service level? Force rank these in order of importance. Would you be willing to trade items between categories? For example, would you be willing to give up a certain service level for a lower price? (Suppliers) Which vendors offer something that you think could meet your needs? How long have these companies been in business? Are you doing business with them already? Do you have a good business relationship with them? (Gravy) If you had your druthers, what extras would you like the vendor to throw in for free? Would you like training or extra manuals? Would you like special reporting? You will probably have more questions in addition to the ones listed above. Take the time to write them down and create the answers. Once you have established your position, you will save a great deal of time evaluating your potential vendors and negotiations will be less painful. Lead The Dance When you are ready to face off with a vendor, do your best to drive the discussion. Get as much information about the vendor and their product and service before price enters into the discussion. Just like car buying, pick out your car (or choice of cars) before you negotiate a price. If you find that the discussion is prematurely heading toward pricing, bring the conversation back to understanding the product or service itself. If you're not ready to talk price, say something like "Right now, I am just evaluating your product (or service). Unless I think there's a real opportunity, I'm not prepared to negotiate price right now." Pricing for hardware, software, and services follow very different models. Hardware prices are fairly standard unless the product is new. Usually, the mark-up on hardware is very small (1-15%). On the flip- side, the mark-up for software is huge (100%+). Software is priced based on value, not the cost to the vendor so you can usually negotiate software prices down substantially. Services are usually based on labor rates and are marked up based on the demand for those skills (15-50%). When you are ready to discuss pricing, take the lead in the dance. Here are the steps to follow (in this order): Follow these steps, and you will strike better deals and build confidence in your ability to negotiate. What I have left out in the steps above are standard questions that vendors love to ask. Let me leave you with these questions, their underlying motive, and what you should say. The trick is to always put the ball back in the vendor's court to better your position:
There are others, but always maintain your control, patience and poise and always take the lead in the negotiating dance! About The Author Andy Quick is co-founder of Findmyhosting.com (http://www.findmyhosting.com), a free web hosting directory offering businesses and consumers a hassle free way to find the right hosting plan for their needs. Feel free to contact Andy at andy@findmyhosting.com in case you have any questions or comments regarding this article.
MORE RESOURCES: 4 Big Tech product managers and an engineer share negotiation tips that nabbed them thousands of dollars in better comp Business Insider University of Alaska faculty contract negotiations head for federal mediation - Anchorage Daily News University of Alaska faculty contract negotiations head for federal mediation Anchorage Daily News Gantz accuses Netanyahu of ‘sabotaging’ hostage deal negotiations with Hamas The Times of Israel Melton, Pennsylvania mayors critical of union in Nippon-U.S. Steel deal negotiations Chicago Tribune Starbucks workers strike in Seattle, LA, and Chicago as negotiations stall KUOW News and Information Negotiations between Sparrow-U-M, workers on hold until 2025 Lansing State Journal Putin Thinks He Can Win: Why Would He Negotiate? Center for Strategic & International Studies What People Still Get Wrong About Negotiations HBR.org Daily Summa Health alleges Anthem holding up negotiations, insurer responds Akron Beacon Journal City Center negotiations down to one development team, sources say RichmondBizSense HHS Releases Final Guidance for Second Cycle of Historic Medicare Drug Price Negotiation Program HHS.gov Patient stressed amid Scripps Health - Anthem Blue Cross negotiation ABC 10 News San Diego KGTV Tulane Professional Football Negotiation Competition Tulane Law School | Collector Paul-Emmanuel Reiffers Reveals His Most Nerve-Wracking Artwork Negotiation Yet Cultured Magazine What People Still Get Wrong About Negotiations HBR.org Daily Ski patrol union contract negotiations reach agreement on 24th of 27 items, but not the main one: pay The Park Record COP29: Climate negotiation drafts are an affront to human rights Amnesty International The Arsenal of Instability: How Expanding Western Defense Production Impacts Negotiations in Ukraine Center for Strategic & International Studies Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026 CMS Tariffs as a potential trade negotiating tactic brownfieldagnews.com What Medicare Negotiation Tells Us About Drug Pricing In The U.S. healthaffairs.org Craig unsure how CR negotiations will play out brownfieldagnews.com CCPD Crisis Negotiation Team Resolves Seven Hour Standoff with Robbery Suspect Culver City Crossroads The Negotiation Advantage: How Women’s Relational Skills Drive Better Deals Columbia University PON Live! Teaching Negotiation in Prison Harvard Law School M&A Negotiation Simulator: Open-Source Release of Alpha Prototype Stanford Law School HHS issues final guidance for second cycle of drug price negotiations American Hospital Association Join us for a Salary Negotiation Workshop University of Montana The Power of AI to Shape Negotiations INSEAD Knowledge Scared to negotiate job offers? Do it anyway. Here’s why. George Mason University Contract Action Team leaders ask for your involvement this negotiation cycle Minnesota Association of Professional Employees Adversarial Anticipation: Real-Time Simulated Negotiation Stanford Law School Impact of federal negotiation of prescription drug prices Brookings Institution Gregory Husisian Comments on USMCA Negotiation, Auto Industry Impact Foley & Lardner LLP Wheels & Deals: Mastering the Art of Negotiation for Settlement Talks and Mediations American Trucking Associations Idorsia provides update on the exclusive negotiations for the global rights to aprocitentan GlobeNewswire What Role Can Turkey Play in Ukraine Negotiations? Center for Strategic & International Studies 300 people trained in leadership, negotiation and strategic communication CAF -banco de desarrollo de América Latina IGA-455: Climate Leadership: Persuasion, Advocacy and Negotiation Harvard Kennedy School Lower Drug Prices Announced Under Medicare Negotiation Program AJMC.com Managed Markets Network Cost of Exempting Sole Orphan Drugs From Medicare Negotiation Harvard Kennedy School Lior Frankiensztajn named 2024 Fisher Fellow in negotiation and conflict resolution Harvard Law School Haub Law's Negotiation Teams Earn Major Recognition in the Villanova Baseball Filing Day Competition Pace News Negotiate Like a Pro HBR.org Daily CMS opens comment period for Medicare Drug Price Negotiation Program - American Hospital Association CMS opens comment period for Medicare Drug Price Negotiation Program American Hospital Association The First-Ever Government Negotiation Process for Drugs Has Finished, But the Politics Are Ongoing KFF Negotiation Presentation and Free Lunch Old Dominion University Negotiations Break Down Between Teachers and District Sonoma Valley Sun Farm aid negotiations fall apart Tri-State Livestock News Ihab Khatib named 2025 Fisher Fellow in negotiation and conflict resolution Harvard Law School Another Administration Win In Medicare Drug Price Negotiation Lawsuits healthaffairs.org The Negotiation Reality in Real Estate INSEAD Knowledge Treaty negotiation milestone and 2025 operating plan gives more certainty for Columbia Riv nwd.usace.army.mil Anna Maria College Hosts First New England Negotiation Competition Anna Maria College Starbucks headquarters cafe unionizes as U.S. negotiations drag The Seattle Times Statement on Energy Permitting Reform Act negotiations Citizens' Climate Lobby Negotiation Timelines of International Legal Instruments (July 2024) Center for International Environmental Law No, the Maple Leafs are not blowing the Mitch Marner contract negotiation - The Athletic The New York Times LSU Executive Education Offering Bundled Negotiation Strategies Courses - Louisiana State University LSU Executive Education Offering Bundled Negotiation Strategies Courses Louisiana State University |
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