As NPI advises clients on negotiation strategy for IT purchases, we find that some IT procurement professionals are comfortable being very aggressive and others are concerned about straining a positive relationship with their vendor by pushing for further pricing discounts and incentives. Many of these vendors are long-term, strategic partners that provide critical infrastructure, tools and applications to run the business.
While it’s important for IT procurement teams to respect these partnerships, getting a fair deal is equally important – and it doesn’t require compromising the vendor/client relationship. In fact, it is this partnership status that supports an argument for reasonable and thorough negotiations. Here’s another way to frame it – if your vendor is a true partner, then they know they owe you a fair deal and expect that you will ask for one.
Here are a few best practices IT procurement teams can employ that address sensitivities around protecting the long-term relationship with an IT vendor:
1. Frame the “asks” around the partnership.
- Request “partnership” pricing when negotiating with vendors. Explain that true partnerships are mutually beneficial and you expect pricing in line with your partnership status, and consistent with peer purchases in the market. Get them to make another price move on this basis.
2. Set a target, and personalize your tone when making requests.
- Internally, decide the discounts and concessions you want to achieve. Then ask the vendor sales representative to help you meet strategic budget initiatives by granting requested discounts and concessions. Tactics include a request for a favor, or a request to support individual or team goals that are measured.
3. Leverage indirect negotiation tactics.
- Apply situational knowledge to your negotiations without necessarily revealing that you have it. For example, if you know that a vendor’s quarter or fiscal year-end is approaching, casually mention that internal approval challenges may push the timeline into the next month. That usually gets their attention, and proactive offers to accelerate approvals may be offered.
4. If you have access to third-party price benchmark analysis and negotiation intel (such as that provided by NPI), don’t tell them.
- Some vendors – although not all – feel threatened by attempts to level the playing field with these insights (not fair, because the vendors are the source of the pricing disparities in the market). Use the information internally to establish your targets and to inform your negotiation strategy. This can be your greatest source of leverage in vendor negotiations, but there’s no need to show your hand.
In all IT vendor negotiations, it’s important for IT procurement professionals to remember they are dealing with a well-trained salesperson that is highly motivated to close the deal and extract maximum revenue. One of the best preparation strategies is to get inside the mind of the vendor and understand how the counter-negotiator thinks and behaves, and what motivates them.
Contact NPI today to learn how to schedule an “Inside the Mind of the Vendor” training seminar to equip your team with effective and amicable negotiation skills.