The First Nightmare Negotiation
The RFP was a normal sourcing process, but then negotiations started. There was the typical back and forth on pricing and terms. To pick a final provider, we asked both suppliers to show up for face to face negotiations. We specifically requested the final decision maker to attend. So when the Senior VP was a no-show and he was dialed-in by phone, things escalated quickly.
Tensions rose. They fought us tooth and nail on every term. Pricing concessions were non-existent. Once they realized that we’d not continue to extend the negotiations past that day and we’d never agree to half their terms, they lost it. They thought they had the only solution known to man and stormed out of the room.
Sure they had the coolest technology, but the sales manager and SVP were arrogant. Unwilling to listen and follow directions. Needless to say, they lost the business. But this wasn’t the end of it. They threw a tantrum when they found out we awarded the business to the runner-up.The nasty-grams (emails) they sent the team went on for at least a month or so. They thought they could bully us into changing our minds. They were wrong.
The Second Nightmare Negotiation
An IT consultant with the same attitude and arrogance. They had been gouging us across multiple regional rate cards.
This time the negotiations were just as nasty as the first. Despite showing a rate analysis, benchmark information and proving out their inconsistencies, the consultants still refused to agree on basic math. They manipulated the rate calculation by lowering the number of total hours to increase the overall billing rate. Negotiations and phone calls tended to feel like flashbacks of the previous IT nightmare negotiation I had.
Again, it didn’t work out in their favor. The business partners overwhelming support contributed to a 15% decrease on the entire rate card. And other regions found out and started negotiating their rates down as well.
The Most Recent Night Terror
This was the most nightmarish 7 months since more than half of that was spent during the contracting phase. From the RFP phase, they were insistent on using THEIR paper based on THEIR terms. I can’t tell you how many times I was told: “99% of our clients just sign the SaaS agreement.” Or how it’s going to have to go through 10-15 separate approvals.
That went over as well as a skydiving walrus. It forced us to engage us with their competitor (very close runner-up) for a contract showdown (who could get through redlines the fastest would win the business). Which was great, because the second supplier’s legal counsel was an even bigger donkey than the first.
That’s where it became my ultimate night terror. I now had to deal with TWO legal teams who were both rude and outlandish. One started off a phone call to discuss terms with how almost half the terms in the hybrid agreement were non-starters. The other went through multiple calls and wouldn’t even consider the hybrid agreement.
Fortunately, our internal legal counsel pushed back, and hard. We negotiated about 30% savings.
What are the Common Factors in IT Negotiations?
It’s not like I hate negotiating with IT providers; but, I would rather have surgery. Without anesthesia. Far less painful. Why? Here are some of the common factors I found in negotiating with IT suppliers:
(1) They tend to be bullies. They will knock you over on the playground and try to steal your money. Literally.
(2) They all use hardball tactics. Take it or leave it. Unfortunately, this doesn’t always work in their favor.
(3) Attitude and arrogance. I can’t imagine how they are to work with after contracting. I worry for business partners well being.
What Can you do to Counteract them?
How can you turn a nightmare into something productive (I won’t even venture to call it anything more)? It’s not easy, but there are a few best practices I’ve picked up along the way:
(1) Business Partner support is key. Create a negotiation plan, gain buy-in and go over it 10 times to ensure alignment if you need to. The push back tends to swing things in your favor.
(2) Stand your ground and have a BATNA (Best Alternative to Negotiated Agreement). Runner-ups can be just as good as the preferred supplier. Don’t give them the signal they’ve lost the business until the fat lady sings (or the contract is signed).
(3) Be ready to walk away. I hate this tactic. But sometimes it’s your best option. Working with someone who is absolutely not willing to concede is not a good outcome by any measure.
(4) Respond in kind/befriend them. Kill them with kindness is always a good strategy.
(5) Have face to face / in-person negotiations. This always disarms people. And it’s always harder to be a bully with a free bagel or cookie in your mouth.