"It's very important to know the vendor's fiscal year and the compensation plan of its salespeople," Chuba says. "Do your best to get to know their incentive plans for various mixes of products and new products. Find out what is in the sales reps' best interest." All that information is ammunition for negotiation. Chuba adds that salespeople will often volunteer this information.
"Try to time your purchases to your vendor's end of year or end of quarter -- especially with software," Hemmady says. Sales representatives are often under a lot of pressure to meet sales quotas at those times. Hemmady adds that some vendors, particularly those from the second or third tier, are under so much pressure when a fiscal quarter or year is ending that they'll often approach you. "They'll say, 'Hey, I'll give you a phenomenal deal for the next five days,' but if you don't have all your ducks in a row, you won't be prepared to take advantage of it. If you know what you'll be buying anyway in the next six months, you'll be in a better position," he advises.
3. Know Your Vendor's Products
Gartner's Chuba also advises buyers to learn where vendors' products are in their lifecycles. "If a product is right out of the chute, you can be pretty sure there's pent-up demand, and it will be harder to get big discounts off the list price. As the product sits in the market longer, say a year, the likelihood that you can get larger discounts is greater." He adds that most vendors are willing to give you very detailed information about their product road maps.
Evaluator's Kerns advises that you know where the margins reside for the vendor. "In storage, the margins are much higher in storage management software than they are in the hardware itself. If you understand that selling you the management software that comes with the hardware is a boon for them, you'll know where there's more price flexibility."
Chuba adds that, as when buying a car, you want to know as much as possible about the vendor or reseller's cost. He suggests checking out data from the Transaction Processing Performance Council, which has discount pricing information for hardware, software, and maintenance.
4. Create a Competitive Climate
Don't allow a good relationship with a vendor to get in the way of making that vendor compete for your business. "We're very strong on vendor and reseller relationships," the nonprofit CTO says. "But it doesn't mean we don't pit one vendor against another when it's time to make a purchase." The CTO adds that his company has a very strong relationship with Hewlett-Packard but often uses "that four-letter word, 'Dell,' " in negotiations with HP. "That's what often gets them to readjust the price."
Kerns goes a step further to recommend an 80/20 rule. "Buy 80 percent from one vendor and 20 percent from another. The vendor that has the 20 percent will work very hard to get that 80 percent, and the vendor that has 80 percent will see what he has to lose if he doesn't compete," he says.
Gartner's Chuba says that for certain commodity areas such as PCs and low-end servers, it's foolish not to get competitive bids. "It's always good to bring in a wild card. If you go with HP and IBM all the time, throw in a smaller vendor to shake things up."