BOSTON (06/12/2000) - Information technology deals are complicated. And so are the tools and tactics we sometimes use to make them. But many times, simple truths work best. For example, the best advice is to never give away your negotiating power before negotiations. The following tenets will give you a great start in keeping the power on your side of the table.
Never tell a vendor:
- How much you're willing to spend or what your budget is.
- It's a strategic partner.
- You have a deadline for the project.
- You love its product.
- "We don't need to write that down. I trust you."
- Your profit margins.
- Who its competitors are.
- Who won the bid.
- It's the only vendor being considered, even if it is.
- You need its product.
- The bids you received from other vendors.
- That you prefer its product over competitors' products.
- Anything that could give it leverage during the final decision-making process.
- You'll sign the deal now and work out the details later.
- Exactly how much you plan to buy.
- You're new to negotiations.
- You'll start with its contract.
- Its price is reasonable.
- It has "locked in" your business, even after the deal is signed.
A member of CAUCUS who works at a large company in the Midwest sent me that list recently.
If you have any great negotiation truths, please send them on. We'll all appreciate sharing what you've learned.
Remember the auto manufacturer that was getting squeezed by an unscrupulous vendor for a ZIP-code software program upgrade fee [Business, July 5]?
The customer had received several upgrades as part of the deal, and a precedent had been set. But suddenly, an upgrade came with a whopping unannounced surprise - a $49,000 price tag.
Well, that story made one of the readers of this column have a flashback.
Frank Hough, a senior contracts consultant at Computer Sciences Corp., recently sent in this story:
We were running a software product from a very small vendor on a machine that we needed to upgrade - in a relatively short period of time - to increase our computing power. The software, with an embedded password keyed to the processor serial number, was critical to a vital business application.
To move the software to an upgraded CPU, we needed a new password that only the vendor could supply.
Our license agreement clearly stated we had the right to upgrade our computers and to receive new passwords at no charge. Each time we requested a new password from the vendor, we received a promise - from the president of the company - that it would be delivered, but no password came.
This went on for several weeks.
Finally, within a few days of our processor upgrade deadline, the vendor's president said he wouldn't honor the agreement and demanded we negotiate a new agreement for more money.
I brought in our lawyers, and the vendor engaged his outside counsel.
As we battled, we asked our technical wizards to find a work-around - and fast.
The vendor never relented. Within eight hours of our seeking an injunction against the vendor, our techies found the work-around.
I found out later that the president felt cheated by the deal he'd signed years earlier because we had never purchased the volume he expected.
I have no idea if misleading promises were made to the vendor or business plans changed, which lowered the volume purchased.
Here's what I learned from this:
1. The best agreement in the world won't protect you completely from unethical behavior.
2. When negotiating a deal, don't make commitments you can't deliver on, or they may come back to haunt you.
By the way, after the work-around, we kept operating and dropped all discussion with the vendor. Within 12 months, we had de-installed the vendor's product.
Thanks for sharing, Frank. No one tells it better than someone who's been there.
JOE AUER is president of International Computer Negotiations Inc.
(www.dobetterdeals.com), a Winter Park, Florida, consultancy that educates users on high-tech procurement. ICN sponsors CAUCUS: The Association of High Tech Acquisition Professionals. Contact him at email@example.com.