Sealing the best deal on a hardware, software, or services contract takes more than bargaining for less than the asking price. Sure, you may realize upfront savings, but you risk incurring unforeseen expenses such as maintenance costs. Negotiating the best IT deals goes beyond securing the best prices alone and it pays to agree on other factors such as quality guarantees, term of contract, warranty, delivery times, and payment terms before confirming the price.
To help, here are four tips that will allow you to be a step ahead in any contract negotiations with IT suppliers.
1. Be Prepared
In my experience, many companies head into a deal without a clear definition of what the software should address in their organization. This is risky since IT vendors may take advantage of what I call “an uninformed negotiator.”
For this reason, design a request for proposal (RFP) or request for information (RFI) template that describes the functions and features, and ideally outcomes, of the type of software you need. If you’ve not seen these two acronyms before, an RFP is a document a company requests from the vendor to understand the offerings and cost of the product or service. In contrast, an RFI is a preparatory document used to gather general information about a product from potential vendors.
Vendors’ responses to your RFP/RFI will help you to set out the scope, functionality, implementation, and cost of the software to your company. With this information, you can assess performance and functionality gaps among vendors, and use these gaps as leverage in the negotiation.
2. Build a Negotiating Team Early
In my experience, some vendors are likely to take advantage of a customer who rushes into contract negotiations. That’s why Mr. Ditka Reiner, president of a software contract negotiation firm in San Francisco, Reiner Associates, says:
“Nothing kills deals more than bringing on the team at the last minute, and it happens 80% of the time.”
If you try to seal a deal ASAP, you may end up signing an overpriced software contract. So, try to build the negotiation team months before you even contact the vendor to prepare well ahead. This gives you enough time to educate your stakeholders, craft a solid RFI/RFP template, train the team, or even to take a legal practitioner through each contract point.
3. Future-Proof the Deal
It’s advisable to form a cordial relationship with your vendor. However, in doing so, it’s possible to overlook some scenarios that you expect your vendor to accept later in the contract based on your “friendship.”
For instance, if you intend to sell your company, you should try to include a clause in the contract that lets the new owners run the software. In the case that the clause isn’t included and the relationship between you and the vendor turns sour before the takeover, you might have to pay extra fees.
Or, what if the software company becomes bankrupt? Would you be allowed to maintain the software system? You’ll need access to the source code in order to make updates. For this reason, it’s important that you proactively include protective clauses rather than trust in your vendor to help if the time comes.
It’s advisable to form a cordial relationship with your vendor. But be careful not to overlook some scenarios that you expect your vendor to accept later in the contract based on your “friendship.” Click To Tweet
4. Be Clear with Any Customizations
Lastly, clarify the areas you want to be customized, and decide how these areas should function. If your requests are vague, the vendor may fail to incorporate your needs into the software correctly.
Even worse, most vendors include a customization acceptance clause of 45 days in software contracts. So, whether the software functions to your taste or not, you’ll have to pay for any alterations after 45 days.
The best way to avoid paying any extra costs on customizations is to define your company’s requirements succinctly. So, train yourself to know your company’s needs, to word your expectations clearly, and to act quickly to negotiate any adjustments.
If my article has you thinking about how to better negotiate with IT suppliers, then I recommend that you seek out related training. For instance, search for “contract negotiation training near me” to give your team an advantage in spotting any missed points or potentially dangerous loopholes.
If you have been caught out by negotiation mishaps, I’d love to hear your war stories. Please let me know in the comments.