SmallBizWithKids.com Small Business With Kids

Just last Thursday I interviewed Martin Ewing on IT negotiation tips and strategies on a conference call.

All in all I gauge it a success. We had 31 people register for the call and 14 actually attended which is a very strong percentage! Three begged off due to the California wildfires and one newly hired IT leader at Dow requested a private briefing.

Martin loves to negotiate and prior to becoming leader of a team of “hired IT guns,” he had over 700 employees reporting to him in his role of the CIO of a public $8 billion global company.

Industry statistics tell us that nearly 50% of IT budgets are consumed by depreciation and maintenance costs and anecdotally, a lot of clients are bellyaching about questionable IT ROI.

Most IT CapEx is also conducted in the 4th quarter, but by and large companies are not aware of the outrageous pricing discounts that they can achieve during this time. Simply put, technology companies are so earning driven that buyers have amazing leverage during the 4th quarter.

Now I use the term 4th quarter loosely. Not all IT companies use a calendar fiscal year. Oracle is a great example. So step one is to determine your vendor’s fiscal year so you can apply the proper tactics at the right time.

So without further ado, here are a baker’s dozen of Martin’s tricks of the trade.

1. Create as much doubt as possible that the deal will close this year.
2. Get the vendor’s sales person to be your Champion.
3. Lock in future purchase pricing for additional licenses or upgrades NOW at the current rates
4. Ensure that any deal requires approval from vendor’s corporate management. If it’s not then it’s not good enough yet.
5. Maintenance price reductions will save money for years to come – negotiate it now. Cost should be in the 16-20% of purchase price (NOT list) range.
6. Only allow annual increases to be at CPI and keep first 2-3 years frozen.
7. Ensure that the coverage hours for maintenance support are no more or no less than what you require (e.g. 8×5, 7×24, 12×5). Negotiate reduced rates for reduced coverage.
8. If “premium” support is offered seriously consider its need. It’s very rarely a good deal.
9. Concessions on “acceptance terms” can often be traded for better pricing – especially at year end due to revenue recognition issues for the vendor.
10. Do not accept SARBOX as an excuse for not reducing pricing beyond a certain level. SARBOX does not preclude them from doing this – it just means that they have to knowingly go against their guidelines and document it.
11. If consulting services will ever be needed – lock in the rates now and freeze them for 2-3 years.
12. At the last minute – try to get some free training thrown in to finalize the deal.
13. At the last minute – use the “spending limit” tactic. i.e. “my spending approval is only $250,000 and your price is $270,00, if we’re going to get this done by the deadline I need to avoid having to take it up the chain for approval…….”

We recorded the call and it will be available on CD shortly. If you’d like a copy, then just let me know.