Planning a purchase from a major IT vendor? In this still tough economy, negotiating pros recommend being aggressive and creative, as well as analysing your requirements first so that you don't buy more than you need and know where you can compromise.
Here are the top tips from consultants who help customers negotiate pricing, terms, and conditions with vendors such as Cisco Systems, EMC, Hewlett-Packard, IBM, Microsoft, Oracle and SAP. We've arranged them in three groups:
1. Above all, be bold and creative
First, remember that vendors need your money and you don't have to blindly accept their terms. This may seem obvious, but reminding yourself of this fact will give you the confidence you need to question assumptions and common practices that favor the vendor. The initial negotiation, before you've agreed to buy and face the "switching costs" of moving to a competitor, is when you have the greatest leverage over a vendor, says Gartner analyst William Snyder.
Hold vendors' feet to the fire on pricing
This begins, of course, with price. "We've let them know that once you get a price, you can't really go back and increase the price substantially or even really minimally," says one EMC customer who asked to remain anonymous. "If they try to hook us in with a teaser price and then jack up the price of future capacity... it will be detrimental to their future in our organisation, and they know that."
Propose a deal the sales reps will want to support
Learning how sales reps are compensated can help you sweeten a deal to get the rep on your side and get concessions "you wouldn't have gotten if the rep hadn't been really behind the deal," says Duncan Jones, a principal analyst at Forrester Research. That might mean, for example, buying a comparatively low-cost product or service you can actually use to convince the rep to fight for a better price on another part of the deal.
Negotiate with a senior vendor exec
David Blake, CEO of IT sourcing and commercial advisory firm Upper Edge, recommends forming relationships, and negotiating, with a senior executive at the vendor. This creates a human bond that helps cut through bureaucracy and encourage cooperation, while showing you want a strategic relationship rather than just a transactional relationship when you need a specific product.
Many vendors "are very good at telling people no immediately," says Blake. "And they're very good at telling people no three or four times. For certain things, you need to understand it's the fifth or sixth time... when they finally either say yes or at least compromise."