Negotiation is part of life. If you don't believe that then you've never had kids, a job, siblings, nor parents for that matter. My son understands negotiation. At three years of age he already tries to deal - tell him he can only have 1 of anything and he quickly moves to his primary negotiating tactic of "I want three." We sometimes settle at two, other times he loses that second in favour of an alternative - a song, a story, or maybe just some of my time during a busy day. Did he win? Yes, but only sort of. Winning while giving the perception of losing is a fine art - one that the best CXOs understand very well.
Vendor Strength - The Great Lie
Without getting into the various scenarios that can impede or complicate negotiations, it is safe to assume that most vendors tend to approach any new deal from the standpoint of being in the driver's seat. This is even more true when you contact them for information about their product or service. No matter what the situation is, these lessons can help you shift the balance of power in any negotiation to your favour.
Lesson 1 - Know when to Hold'em
The vendor wants a sweet deal, you've been placed on a short leash in terms of spending, and you need to get the product/service/upgrade plan in place before year end (all cards that you play very close to your vest). Lesson 1 in the art of the deal - never, and I mean NEVER, put all your cards on the table. This is important because the only tool you have in negotiating with a vendor is knowledge - knowledge about your company, time table, budget, etc... The old adage "knowledge is power" is 100% true. Deciding when to divulge your knowledge is critical. My favourite tactic (but by no means my only tactic) is to figure out how much stall time I have before I need to present a decision and then I use as much of it as possible. Making them wait is often a key to ultimate success, but you cannot let them know when you need to make a decision - NEVER PLAY YOUR CARDS UP FRONT!
Lesson 2 - Them that have the Gold
Them that have the gold make the rules!!! In negotiating you always have to figure out what the gold is and who has more of it. In many cases it is, pure and simple, CASH! For the vendor their gold is the services they perform or products they deliver. They put a value on their treasure and it is up to you as the negotiator to help them see that they need to surrender some of it. If this sounds like war that's because it is. Some wars are fought till the utter defeat of your enemy, other wars are fought to a stalemate, and still others are fought over turf / ground / land etc... My strategy is to always (and I mean always) play down the other side's hand even when they call your bluff. Also, you should try to keep other options open so that, even if you end up paying a little more this time, you can come back later and renegotiate with the same set of vendors. At some point the cost of something, on a marginal scale, has to make you look at walking away and trying a new tact all together.
Lesson 3 - Go to the Mattresses
In Godfather parlance this means getting ready to do battle. Negotiation means you have to study who you are up against. A common mistake is to invite a vendor in to speak with you without studying them ahead of time. When you are thinking of buying a new car you do some research and try to find the best deal. Well, vendor negotiation is very much the same. Don't be afraid to ask to speak to references beforehand - and tell them you will be wary of any reference that is too glowing. Part of Going to the Mattresses is respectfully undercutting the quote to a somewhat ridiculous level (if you ever get to that point with a vendor). Some might say that this is insulting, but there is nothing insulting about cold hard cash and you only get one chance to get a rock bottom price - so you have to ask for it.
Lesson 4 - Playing Hard to Get
It is alright to play hard to get, so long as you understand that at some point you will want to dance with someone. You cannot let your emotions get carried away and never under any circumstance get to a point of feeling sorry for a vendor or their representative - this is business and if you allow emotion to sway you then you can kill your own career in a hurry. That doesn't mean that you don't want to develop a relationship. Like I said, eventually you want to dance with someone, but keep in mind that the vendor is going to be looking after their bottom line so you had better be looking after yours.
Le Coup de Grace
Once you are at the point of signing on the dotted line you cannot forget that this is but one battle in a never ending war. Now, don't get the impression that your relationship with the vendor needs to be venomous or toxic, quite the opposite is true - you need to develop a keen relationship with your vendor representatives and people in your vendor's back office. It is these relationships, often built during hard fought negotiations, that will largely determine the success of a partnership - not just the technology, product, or service to be delivered. Much respect can be earned for being a tough but fair negotiator, on both sides. At the end of the day you need to be able to work with those you have contracted with.
Also Published on The CTO Forum
Also Published on The CTO Forum
