How to get tough with your tech vendors

InfoWorld's guide to driving a hard, smart IT bargain in a tough economy

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Negotiate with a senior vendor exec. David Blake, CEO of IT sourcing and commercial advisory firm Upper Edge, recommends forming relationships -- and negotiating -- with a senior executive at the vendor. This creates a human bond that helps cut through bureaucracy and encourage cooperation, while showing you want a strategic relationship rather than just a transactional relationship when you need a specific product.

Be persistent. Many vendors "are very good at telling people no immediately," says Blake. "And they're very good at telling people no three or four times. For certain things, you need to understand it's the fifth or sixth time ... when they finally either say yes or at least compromise."

Help the vendor do the right thing. Blake also suggests putting your requests in a win-win context. When asking the vendor to lock in price for several years, he suggests, for example, that you mention that the price guarantee will remove one uncertainty from the budget process the next time you go for approval to buy more products from that vendor.

Focus on terms and conditions, not license price. Although many customers focus mostly on the price of what they're buying today, almost every consultant interviewed by said it's more important to negotiate the right terms and conditions for everything from future purchases to transferability of licenses and how maintenance fees are calculated. "There's much more money to be saved in optimizing and licensing properly than in negotiating an additional percentage point or two percentage points" on the license cost, says Daryl Ullman, managing consultant at Emerset.

Make your RFP "buyer-biased" to cut haggling. Timothy Nuckles, a principal in Nuckles Law, a technology law firm specializing in IT procurement, sometimes makes his "buyer-biased" terms and conditions part of the request for proposal (RFP) and, thus, a requirement for a vendor to be considered. This cuts haggling time, he says, because once a vendor has been chosen, there "aren't many terms left to negotiate." His requirements might include forcing the vendor to fix bugs under warranty rather than under an expensive maintenance agreement, or providing refunds on licenses or maintenance for software that takes longer than expected to deploy. Or he might include clauses specifying the prices at which a customer can upgrade licenses if required by an audit, or the refund a customer will receive if it needs fewer licenses in the future.

Make sure your business partners are covered. Consultants say customers are often stymied by whether and when business partners need licenses to access software customers have purchased. Blake says SAP, for example, doesn't always "fully disclose and proactively inform the client" that customers or suppliers must be licensed to access the customer's SAP system, which "is a huge, enormous hidden cost." An SAP spokesman says its contracts address the issue, while a spokesman for EMC, the only other vendor to address this question, says its sales teams work with customers "to avoid this situation and we do not see this as a notable issue."

Reject pricey maintenance plans. A growing number of customers are rejecting high-paid maintenance plans altogether, consultants say. This is especially true for older products that don't need updates or aren't likely to be updated, as well as software that customers can maintain themselves or for which third parties provide better support at lower cost, says Phara McLachlan, CEO of IT management and consulting firm Animus Solutions.

If you do opt for maintenance, Nuckles recommends negotiating maintenance separately from licenses to assure that you get the best price for both. Yet another option: Buying maintenance only if and when you need it, which "puts the onus on the vendor to keep developing meaningful updates," McLachlan says. Some vendors are penalizing customers for dropping maintenance, making it another issue you might want to address in your terms and conditions upfront.

Don't make idle threats. Negotiating hard is one thing; misleading your vendor is another. For example, don't tell Microsoft you're considering a move to open source unless you at least have a transition plan or pilot deployment to show you're serious. "Once Microsoft understands it's a bluff, it will feel much more secure and confident, and be less ready to discount heavily," says Ullman. With its software integrated into enterprise ERP, workflow, management, collaboration, and other systems, Microsoft knows replacing it with an open source alternative will be too complex for many customers, he says.

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