Stephen Foskett and Martin Glassborow have some great posts about pricing and negotiation lately, and I thought I’d jump into the fray. In my experience, there are a few other things to consider, especially if you’re new at this. Much of this is standard negotiation technique, but tech folks don’t necessarily come with the same level of negotiation experience as some other disciplines so I think it bears repeating.
- Everything is negotiable. The corollary of this is “you will not get what you do not ask for”. Bear in mind you may not get it even by asking, but you won’t know if you don’t ask.
- Keep your options open. Make sure you keep as broad a scope on the negotiation as possible. It is in the vendor’s best interest to lock you into thinking you need some aspect of his solution, which he can then use to lever you into considering competitive products that are out of your league. Instead, when you’re negotiating for a new internet pipe, negotiate from the stance that you could downgrade to a cable-modem and co-locate your services.
- Focus on your business needs. Often-times you may think you need one thing, but you actually need another. While you need to know the specifics of what you’re buying, if you continually bring the negotiation back to the business problems you are trying to solve, you may find your vendors are able to offer you a better product from a different part of the house. This is another form of keeping your options open, but it’s very important, because it keeps the onus on the vendor to meet your needs rather than just quote you a bill of goods.
- Put time on your side. Simply put, start negotiations early and make sure your deadlines aren’t hard ones. Like Martin says, align your purchasing cycles with your vendors quarterly sales targets. The more time you can afford to take, the more time you have for the vendor to get desperate to close the deal and scare up some better pricing. Don’t overdo it though, your long term relationship will suffer if you are always taking vendors for a ride and never buying.
- Understand what you are buying. Unfortunately, at least at the scale I am usually buying, I know more about the technical details of the product class and even the specific products being discussed than the vendor reps. I’ve found if I don’t know more, I’m likely to get taken for a ride with things I don’t need. This plays heavily into the next point as well. You simply can’t afford to buy stuff that won’t meet your needs fully, and nobody but you can really ensure that.
- Demand a demo. When you’re spending big bucks, this usually isn’t too hard. But you can still get demo’s if you’re buying less, and frankly, especially with the economy as it is lately, if the vendor won’t take you seriously enough to get you in front of the kit they want to sell you, you don’t want to do business. There’s really no reason to purchase something you aren’t 110% confident is going to meet your needs, so prove it to yourself before signing anything.
In conclusion, if there’s a single rule I’ve found, it’s that there is no shortcut. A perfect RFP is still just the first step towards getting a good solution for a great price. You’ll still have to learn all there is to know about the product, build a relationship with a vendor, and make sure you’re buying the right thing. Don’t be seduced by the siren’s call of a “write the check solution”, the only problem it will solve is your vendor’s cash-flow.