Negotiating a storage deal? Improve the odds with these tips

So you've managed to get through the vendor-selection process and are ready to ink the deal. Whew, the tough part is over, right? Time to let the lawyers sign off? Not quite. Sophisticated storage projects are often plagued by problems that can be avoided with proper planning early in the game -- during the negotiation process.

Minimize the gamble and get the inside track -- consider the following seven tips when negotiating storage deals:

1. Include the negotiation process in the project plan.

The process of negotiating a contract is an integral part of your storage implementation. So why not include it in your project plan? Give it the time and attention it deserves, and include it as a project milestone.

2. Don't pass off the entire negotiation process to the legal department.

Is legal responsible for delivering and managing storage? No, you are. So why let it negotiate on behalf of IT? When negotiating with storage vendors, there is no such thing as "fine print." Make it your responsibility -- your mission -- to be involved in all aspects of contract negotiation. Make it clear to legal what's at stake. It's not about a storage system so much as it's ultimately about your organization's lifeblood -- corporate data. Don't settle for the vendor's "loaded deck" -- contract terms tipped in its favor. Customize the contract toward protecting the value and integrity of the corporate data. Final approval before execution should be reserved to you and key corporate stakeholders.

3. Get as much as possible in writing. Don't press your luck.

Don't rely on a handshake and a smile. Sales representatives come and go, especially in the storage industry. There is no guarantee that the same hand, or mouth, involved in the negotiation process will be there before the ink dries. Therefore, it's important that you get as much as possible in writing. Enlist help. Engage all staffs responsible for the design, implementation and management of the storage system involved in developing criteria to be included in the contract. Ignore internal governance issues that may exist between operations and IT staff. Perform a roundtable assessment of "what-can-go-wrong" scenarios to identify possible contractual elements. Some resulting inclusions:

  • Service-level agreement objectives that only coincide with internal IT SLA obligations should also include monetary penalties/remedies resulting in reduction in annual maintenance charges. Play with the same deck. Always make it about money and free equipment or services.

  • Vendor commitment to participate in annual or biannual business continuance and disaster recovery verification drills.

  • Support requirements that include proactive identification of regulations affecting your business in addition to a proactive notification process alerting technical staff of patches/fixes/upgrades relating to various storage components (such as firmware or software).

  • Facilitation of quarterly technical briefings with your staff to review storage industry trends, the vendor's strategic response and how it aligns with your internal IT strategic goals. Take a close look at your vendor's engineering plan. Does it meet your deadlines? Close, but no cigar? Make it so while you have the leverage during the negotiation process.

  • Commitment to ownership of issues relating to all (or most) storage components. In other words, get the vendor to agree to facilitate required vendor-to-vendor collaboration when conflicts arise with various storage components. Avoid being the arbitrator: Involving multiple vendors is key to your ultimate success in resolving such problems.

4. Don't assume that vendors will always be around. Call the bet.

Storage industry "high rollers" are no less vulnerable than smaller vendors to mismanagement and corporate scandals that may result in bankruptcy or other means of insolvency. Include in your overall storage strategy a plan that takes into account a primary vendor's sudden inability to provide goods and services. In other words, assess the impact of a primary vendor's liquidation, then take appropriate steps to reduce the impact. Involve the vendor in developing a contingency plan aimed at answering some general questions. What vendors/products can be substituted for the goods (hardware, software) and services (support, consulting, outsourcing) provided by the primary vendor? At what price? Dollars? Resources? Performance? Ability to remain in step with current strategic IT goals? Will substitution require "rip and replace," or is there a product/vendor out there that can be transitioned more smoothly? Also, be sure to include a solvency clause in the contract that goes beyond general provisions that are usually limited to granting the legal right to immediately terminate the contract.

5. Make signing of contract contingent on successful proof of concept. No dice.

A well-executed storage system proof of concept requires clear articulation of the proposed system's architecture, components, goals and metrics for evaluation of success. This is a valuable process to engage in with the prospective vendor, a true postsales trial run of a future relationship, right? Wrong. The proof-of-concept phase is often indicative of how the vendor will perform during the production phase. Vendors will often send in their top talent to work on the proof-of-concept phase and leave you with the "B" team during production implementation. Key considerations for proof-of-concept negotiations:

  • Ensure that all required components and services are supplied on the vendor's dime.

  • Document and agree to scope and specific time frames. Clearly articulate the start and end dates.

  • Set clear expectations: "If it doesn't work, no deal." Hint: Save the packaging.

    6. Consider contract renewal as a negotiation point.

    Think ahead, outline now the metrics you will be using for determining whether the vendor will win renewal. Send the message that it's a done deal and that they are continually working to impress and make the sale. Think about the contract term carefully. What's reasonable? The typical one-year contract may be. Are there incentives (usually a percentage reduction in cost) for longer contract terms? Use caution here. You might want to see if you like the hand dealt before signing a long-term contract. Then consider negotiating a two- or three-year term based on how the vendor has performed the first year. In any case, be sure to negotiate for prorated refunds if you want out.

    7. Deal everyone into the game.

    While the ink is still fresh, engage the technical staff in reviewing, understanding and being accountable (where appropriate) for contract details. Instill a vendor management structure that transcends department governance. Start by distributing the signed contract to all staffs responsible for supporting and maintaining the storage infrastructure. Schedule a meeting three weeks out and make it clear that contract details will be discussed. Design a pop quiz, complete with prizes to make the meeting fun. Once the importance of contract details are clear, assign staffers as vendor managers with the objective of ensuring that contract terms are met on both sides. Common tasks would include facilitating regular vendor meetings, reviewing SLA reports/metrics, exercising escalation processes, ensuring maintenance and other annual fees are paid on time, etc. In other words, don't let the contract collect dust. Integrate key elements of the contract into your operations, policies and procedures. "Mechanize" alerts to key deliverables of the contract within your storage management system. Use it!

    - Robert Galletta and Melanie Heintz are IT staff directors at the Federal Reserve Bank of New York and co-chairmen of a storage management special interest group in New York.

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