10 Rules for Vendor Negotiations
Almost all technologist get the opportunity at some point in their career to negotiate with vendors and/or manage a vendor relationship. Often this is a critical part of the job for the VP of Operations or the CTO/CIO. Below are some ideas on how to make the negotiation and ultimately the relationship with the vendor successful.
- Be honest. Don’t lie to vendors about anything. It’s often tempting to stretch the truth about other vendors and their offers, timelines, budgets, approval requirements, etc. It’s better to say nothing, lies will damage the relationship forever.
- Don’t take things personally. The vendor’s sales reps do this day in and day out, most aren’t going to lose sleep worrying about if you like them or not. Your loyalty and motivation should be to your investors.
- Consider the relationship. While negotiating is often viewed as a game, be aware that your behavior will follow you into the relationship. See rule #1.
- Give yourself time. Time is your best friend in negotiations. Many vendors have rearranged their fiscal year because their clients know how desperate many sales reps are to close sales and receive their commission during these times.
- Give yourself options. Follow our advice on scalability so that you are vendor neutral and can change vendors with little effort or concern.
- Do your homework. Find out about the vendor, their customers, their solvency, their post sales support, etc. Use your network, find out what other people pay for similar services. Be prepared for there to be huge differences based on the total size of a purchase a company makes but at least know the ballpark range.
- Keep negotiators separate from implementers. If possible have the people negotiating the deal different from the people who have to work daily with the vendor. This way in the event either party feels slighted in the deal they don’t have to work with the same people the next day.
- Don’t discuss your budget. The vendor has no need to know how much you can afford to spend on this purchase. It’s okay to let them know that you will need additional authorization to make the purchase if you think the price is beyond your ability to authorize.
- If it’s not in writing it never happened. Lots of things get said during negotiations that get put into the contract and therefore never get delivered. If it’s important get it in writing.
- Ask for anything. Once you’ve exhausted the pricing negotiation ask for other things that aren’t cash related such as additional modules, higher support levels, steeper discounts for future purchases, etc.