You’ve completed the filtering process, and now you have some final decisions to make. While you should begin pricing and contract negotiations early in the process, now you need to see those discussions through to a final deal.
Most organizations struggle to fathom vendor price quotes, and with good reason, since suppliers often apply arcane, confusing fee models. Beware that costs can run higher than you originally expected, but following some best practices can prepare you for negotiating a fair price from a position of strength.
Like auto dealers, technology sales people will try to create a friendly relationship in an attempt to head off potentially difficult conversations. Remain businesslike throughout, and that means beginning to negotiate pricing as early in the process as possible, and then continuing to move the chains throughout the selection process.
Similarly, contract negotiations can become highly byzantine, but are no less important to start early and discuss often. I won’t offer legal advice here, but will suggest some key areas and terms to which you should pay special attention.
- Price and contract negotiations are an iterative process that you should start as early as possible
- Normalize pricing quotes from competing suppliers over a five-year period, using your own template
- Radically different price points from competing suppliers could reflect a very different understanding of your environment or different levels of service; probe and ask questions
- Do not forget the costs of associated professional services
- Do not overpay for yearly maintenance and support (20% is average) and make sure that it covers upgrades
- Make the vendor identify optional modules that are not included in their bid
- You can frequently negotiate 20–50% discounts on licensing, but bidders will prove to be more stubborn on services and hosting rates
- Never buy licenses for a potential future need, no matter how good a deal is proffered; instead, drag the buying process out over time: buy only what you need, when you need it, and in the order that you need it
- When working with cloud suppliers, review SLAs, data ownership, data security, and data disposition clauses very carefully
- Look for indemnification clauses in contracts, especially where a vendor is embedding open source or third-party modules that may risk an intellectual property claim later.
Other Posts in This Series
- Tip #1: Articulate a Solid Business Case
- Tip #2: Build the Right Team
- Tip #3: Setting the Right Business Foundations
- Tip #4: Capture Requirements That Don't Suck
- Tip #5: User Stories Are Everything
- Tip #6: Ask Questions That Really Matter
- Tip #7: Find More Than the Usual Suspects
- Tip #8: Target the Right Suppliers
- Tip #9: How to Engage Vendors
- Tip #10: Create RFPs That Actually Work
- Tip #11: Keeping It Real with Bidders
- Tip #12: Evaluate Proposals Critically
- Tip #13: Hold Demos on Your Own Terms
- Tip #14: Run Competitive Bake-Offs
- Tip #15: Negotiate Like a Pro
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