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Negotiations: Principled Concessions by Steve Gutzman

A very common image of negotiation is one that depicts two adversaries, deadlocked in a heated battle of words, each telling the other to take it or leave it, uninterested in any point of view but their own and showing little respect for the process and little humility in their actions.  This common image further contends that someone has to lose in order for someone to win.

If a vendor’s approach to negotiations is to win by not allowing the customer to win as well, the vendor has gained little.  Sure, the vendor may score a contract sale and commission check, but if they have left a trail of damaged egos and relationships, then their success in that account will be very short-lived.  Conversely, if a buyer’s approach is to win by not allowing the vendor to win, the buyer has gained little because the vendor will begin scheming on ways to get even before the ink on the contract has dried.  Given this seemingly intractable face-off, is it possible to negotiate to where both sides win?  Is there such a thing as a win-win outcome?

Unfortunately, the term “win-win” is often misunderstood.  Some see it as a utopian ideal found in academic journals.  Others see it as “building a relationship and then giving away the store.”  “Win-win,” as used here, is a very real and tangible process that can yield extraordinary results when used properly.  In short, it means not defining all your terms in all-or-nothing language.  It means “I’m willing to consider this … if you are willing to consider that.”  It means both parties get something and both parties walk away feeling like they’ve won.

A helpful tool negotiators have at their disposal to create an environment in which this kind of outcome is possible is the use of a “give and get” list.  In a typical negotiation, both sides will be asked to make concessions.  Knowing beforehand what they are able to give and what they want to get in return is key.

From the buying side, the list might include such things as a discount on the hardware, a reduction in maintenance percentages, a concession on backup systems, training, on-site customization, and more.  Each line item should have a value of what that concession is worth.  On the selling side, the list might include such things as agreeing to become a reference, speaking at a company-sponsored event, talking to the press, agreeing to become a future beta test site, becoming a member of an advisory committee, extending the contract commitment period by one year, adjusting future payments, or adding a newly announced product for evaluation against a competitor’s product.  Each of these line items would have a corresponding value, providing each side with a scorecard of what their options are in the negotiation process.  The list does not have to be perfect – some values will be precise while others won’t, because the value of intangible items can sometimes be hard to determine.  But having this list provides alternatives when it is tempting to provide unilateral concessions – concessions where nothing is given back in return.

Going into an IT negotiation with a “take it or leave it” attitude rarely yields positive long-term results.  Concessions – the principled kind – should be part of the process, and the give-and-get list can be a helpful and disciplined guide in this process.

One simplified way to view negotiations is to see it as a tug-of-war – a battle that takes place along a fictional rope, with one side tugging toward the right and the other side tugging toward the left.  The customer’s closely guarded maximum determines one end of the line segment, and the vendor’s equally well-guarded minimum bounds the other end.

Let’s look at the legal profession to illustrate this.  In most civil actions, both sides are aggressively trying to win, and in order for that to happen one side has to decidedly lose.  Once the trial is over, and absent an appeal, papers are drawn up, damages are paid, and the two parties will probably never see each other again.  This win-lose strategy works in those situations.

But sourcing IT tools is remarkably different.  From the vendor’s perspective, they need to see the customer the next day, and the day after that, and the next year, and the year after that, and ultimately for the next contract renewal and for the one after that.  If the vendor’s approach is to win in such a way that the customer loses, they really haven’t won at all because they will have lost the customer relationship, and with it any opportunity for subsequent sales, renewals, or maintenance agreements that are critical to their continued success.  Therefore, our starting position for preparing to negotiate should be to find a win-win outcome.