In order to get price reductions when negotiating with a preferred vendor, there are several tips that IT professionals can take from the experiences of organizations like Company X:
1. Do homework. Even if a particular vendor is the favorite, take the time to investigate other vendor options. If pricing disparities exist between vendors, leverage this information during the negotiation to achieve a reduced price.
2. Don’t seem too eager. If the vendor knows that it is the top choice, it can use this as leverage against the organization. Use the background research gathered from online searches, research firms, or competitive bidding to make the vendor aware that the organization is considering other options.
3. Leverage the relationship. When renegotiating an existing contract, use the existing relationship to be upfront with the vendor about pricing needs and to gather information about the vendor’s business and goals. Even when negotiating a new contract, be friendly with the vendor and make it aware of shared goals and purpose.
4. Know what the organization has to offer. Remove the stars that might appear in IT’s eyes when thinking about its top pick, and take a moment to think about the negotiation from the vendor’s perspective. What does the organization have to offer the vendor? These offerings could range from allowing the vendor to expand its industry experience, to offering to serve as a reference or as a beta site to test new products.
5. Know when to use which negotiation strategies. In general, there are many possible strategies that can be used to get a reduced price during contract negotiations. Refer to the McLean Report research brief, “Reduce Costs Using Top Negotiation Strategies” as well as the associated McLean Report “Negotiation Strategy Selection Tool” to find out exactly which negotiation strategies to use based on a particular situation.
6. Know that price isn’t everything. While getting a price reduction is often important, it is essential to take a balanced approach and to consider the big picture when negotiating contracts. Make sure that the organization isn’t sacrificing necessary levels of quality or service, or jeopardizing the relationship with the vendor, just to achieve the lowest price. Finally, avoid exposing the organization to undue contract risk by ensuring proper warranties and remedies for any service or solutions provided.
One way that IT professionals can attempt to cut costs is by negotiating for lower pricing from vendors. On the surface it might appear difficult to negotiate for a lower price with a vendor that is IT’s top pick, however this process doesn’t have to be as tough as one might think. Cut costs for the organization using the negotiation advice gathered by Info-Tech from IT professionals in the field.
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