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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.
Latest News:Site: Yahoo! News Search Results for news Myanmar's Suu Kyi to get family letters, news mags (Reuters via Yahoo! News) Detained Myanmar opposition leader Aung San Suu Kyi has managed to wring small concessions from the ruling generals in the form of letters from her family and some international news magazines, her lawyer said on Friday. SEC Looks Into UAL Stock Scare; Implications For Online News? (CBS News) A ton of digits have been devoted to this in other spots but the SEC's decision to investigate takes it to another level. The backstory: a six-year-old news story about UAL declaring bankruptcy made it into the Tribune-owned Sun-Sentinel 's current news flow, was picked up by a Google (NSDQ: GOOG) News bot and, via a reporter for a newsletter, made it onto Bloomberg News. After a lot of buck ... JCDecaux in talks for News Outdoor Group in Russia (AP via Yahoo! News) French outdoor advertising firm JCDecaux SA said Thursday it is negotiating to buy Russian rival News Outdoor Group from global media company News Corp. News Corp tightens grip on Premiere with new CEO (Reuters via Yahoo! News) Rupert Murdoch tightened his grip on German pay-TV broadcaster Premiere by appointing News Corp executive Mark Williams as CEO in a move to get the company back on track. Phila. mayor to announce grim budget news (The Philadelphia Inquirer) The Nutter administration is expected to announce grim budget news today, which is all but certain to lead to significant spending cuts - perhaps as high as 10 percent - in some city departments, according to three sources familiar with the budget. Help News pick Stadium's greatest moment (New York Daily News) The News is marking the countdown to the final game at The House That Ruth Built by reflecting on Yankee Stadium's greatest moments - and we're asking you - the reader - to help us pick out the best of the best. JCDecaux and News Corp. in talks to combine outdoor ad groups (International Herald Tribune) The News Corp. chief executive, Rupert Murdoch, has recently expressed nervousness about investments in Russia, where News Outdoor generated the bulk of its revenue last year. SEC Looks Into UAL Stock Scare; Implications For Online News? (paidContent.org via Yahoo! Finance) A ton of digits have been devoted to this in other spots but the SEC's decision to investigate takes it to another level. The backstory: a six-year-old news story about UAL declaring bankruptcy made it into the Tribune-owned Sun-Sentinel's current news flow, was picked up by a Google News bot and, via a reporter for a newsletter, made it onto Bloomberg News. JCDecaux in talks to buy News Corp. billboard unit (AP via Yahoo! Finance) In a deal that would create the world's largest outdoor advertising company, French conglomerate JCDecaux SA said Thursday that it is in talks to buy Russian rival News Outdoor Group from global media company News Corp. News Corp says Mark Williams interim Premiere CEO (Reuters via Yahoo! News) News Corp. executive Mark Williams has taken over as chief executive of German pay-TV broadcaster Premiere in an interim capacity, News Corp. said after the move led to renewed takeover speculation. Site: news - Google News Staunton News Leader lays off 10, cuts 5 positions - CNNMoney.com
MORE RESOURCES: Site: Yahoo! News Search Results for negotiation Report: Israeli official says Jerusalem not on negotiation table (People's Daily) The future status of Jerusalem is not on the negotiation table between Israel and the Palestinians, local daily Ha'aretz quoted an Israeli official as saying Thursday. Earlier Thursday, Jack Walles, head of the American consulate in Jerusalem, was quoted by a Palestinian newspaper as saying that Israel has agreed to discuss the question of the holy city in the peace talks with the Palestinian ... AM Topic: Salary Negotiation (AskMen) When you're trying to secure a new position in your career, salary negotiation is often considered one of the trickiest steps -- it's also one of the most important. You don't want to turn off your potential employers and make them rescind their offer. Hostage/Crisis Negotiation Training Seminar at ECU (The Daily Ardmoreite) A three-day Hostage/Crisis Negotiation Training Seminar will be offered in Ada Sept. 26-28 by East Central University?s Tribal Police Training Program, ECU?s Psychology Department and the Council on Law Enforcement Education and Training. Wednesday is the last day to register. Philex says in negotiation for sale of shares (GMA News) MANILA, Philippines - Philex Mining Corp., the country's largest miner, on Friday disclosed that it is negotiating with foreign investors for the sale of shares that it acquired from a buy back program. Updated 9/11: Get facts, leave feedback on District 158 negotiation Web site (Algonquin Countryside) The public is invited to ask questions and leave comments about School District 158's ongoing teachers contract negotiations on a news and information Web site. Nuke negotiators hold breath on North Korea's situation (Asia News Network) As focus remained on the health of North Korean leader Kim Jong-il who reportedly suffered a stroke last month, Washington and Seoul yesterday (September 11) tuned into what effects it could have on the stalemated nuclear negotiation and strained inter-Korean relations. Latest Additions (The Barnstable Patriot) After months of negotiation the Cape Cod Baseball League and Major League Baseball Properties (MLBP) have reached an agreement that allows the CCBL to continue its use of trademarks of Major League Baseball teams, including the Hyannis Mets. Why real estate deals fall through (Newsday) Faulty Paperwork, failed home inspection, and bad credit are just some of the issues that can kill a successful negotiation. Serial Counterfeiter Arrested (Garden City News) Garden City Police announce the arrest of a serial counterfeiter who received a five-figure check for a fake Patek Philippe which he sold. Ian K. Kosloff, 31 walked into H.L. Gross & Brothers on Franklin Avenue on Aug. 6 to sell a watch he said was worth $20,000. After some negotiation, a jeweler wrote him a check for $12,500 in exchange for the stainless steel watch. Fitch Rates NCMC's (Colorado) $55.5MM Revs 'A+'; Outlook Stable (Centre Daily Times) Fitch Ratings has assigned an 'A+' underlying rating to the Colorado Health Facilities Authority's approximately $55.5 million hospital revenue bonds (NCMC, Inc. Project) series 2008A&B. The 2008A&B bonds are expected to sell via negotiation during the week of Oct. 14 and will be issued as variable-rate demand bonds backed by a letter of credit. In addition, Fitch has affirmed the underlying ... Site: negotiation - Google News Auto CEOs Aren't Making Their Case - Wall Street Journal
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