How to negotiate with vendors

The essential skills you need when dealing with external partners

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If there's one skill that usually gets short shrift in giving up-and-coming leaders valuable on the job experience, it's negotiating contracts with external partners. In some large corporations there are so many parties involved in forging vendor relationships, from internal purchasing organisations and general counsel to outside consultants and advisors, that it's difficult for budding IT leaders to get any experience in edgewise. In smaller organisations, top IT brass may cleave so closely to the contracting and management process for fear of losing money or putting the company at risk that they lock their next generation out of the process.

Yet negotiating contracts with IT partners, and managing the resulting relationships, is a proficiency that's multiplying in importance for IT leaders as outside providers deliver more and more of the IT solutions portfolio. "There are several key skills all individuals in IT need to take with them to advance in their career, and contract negotiations is absolutely one of them," says Mark Carbrey, CIO of Cross Country Automotive Services and a group mentor in the Pathways leadership development program of the CIO Executive Council. "The technology world has become so very complex in terms of the web of suppliers and partners that you must embrace to succeed."

Providing this career enhancing opportunity, without taking unnecessary risk, takes some care both on the part of the CIO providing it and the IT manager taking advantage of it

Building toward a solo shot

Carbrey has very clear ideas about what he wants from IT contract negotiations, a well-defined process, clearly defined requirements, and ultimately a true business partnership. To instill those vendor negotiation values in his managers, he employs a team-based approach. His best and brightest will get numerous opportunities to serve on a five person review team negotiating one of Cross Country IT's many contracts.

After they've absorbed the essentials, what it means to treat a vendor like a partner, how to define requirements in an ever-changing business context, Carbrey gives his promising performers a shot to take over, but never on the most critical contracts. Instead he looks for new deals or renewals that are lower risk, say a conference call provider or new supplier for printer maintenance. "We may sacrifice a little bit of money or performance [if the negotiations don't go well] but we won't put the company at risk." It's a win-win, it takes something off of the CIO's plate and gives his top talent more negotiating experience.

Sorting out what's important

What's important and what isn't, that's a critical distinction and key learning experience in negotiating, says Chris White, senior manager of ERP and business systems for Hess's exploration and production business and a Pathways program participant.

First you must "understand the business drivers behind the contract, what should be the negotiating positions including must-haves and the willing-to-part-ways-with," says White, who's been involved in negotiating contracts for the last five years. "Then you have the same dialogue [with general counsel]."

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