But the pain from a bad contract can last years and cost thousands, even millions of dollars. In a worst-case scenario, you could wind up buying gear or services your network doesn’t really need, or enter a relationship with an unresponsive or just plain bad vendor.

Frankly, too many IT buyers fail to employ good negotiating practices.

"We’ve gotten called in to undo a lot of [badly done] deals," says Marlene Bauer, director of consulting services for International Computer Negotiators (ICN), a Winter Park, Fla., firm that advises companies negotiating major goods and services contracts.

How do bad deals happen? Usually because the IT manager lets the vendor salespeople control negotiations or agrees to sign a standard contract. Standard forms are littered with disclaimers of liability, granting maximum protection to the vendor and minimum protection to you. A vendor contract will not include service-level agreements, solid maintenance policies and remedies if the vendor fails to perform unless you demand them.

You’ll be amazed at just how rock-solid IT contracts can be if you take control of contract negotiations. It will also save you lots of headaches - and money. According to Bauer, a formal procurement process that includes the following power negotiating tactics can reduce costs by 25% over the long run.

Prepare, prepare, prepare

Do your homework before you begin discussions with a vendor, says Ralph Capio, an attorney with Armstrong Teasdale LLP in St. Louis and an instructor with ESI International, a Washington, D.C., consultancy specializing in contract management. "The better you prepare, the more likely it is you will succeed in the negotiation," he says.

Preparation includes determining what you need and what you can live without. Do you really require a 5-year maintenance contract for a server you view as a temporary fix in an ongoing expansion? Or what about that groupware application a vendor is offering free for 180 days? Is that something you really want to bother with?

You also want to get an idea of what the vendor wants to accomplish through your contract. Is a hardware manufacturer looking to place switches it’s planning on phasing out soon? Or is a new e-commerce applications vendor trying to establish a foothold in the market? In either case, the vendor would probably be more willing than usual to discount prices. It’s up to you to know that and adjust your negotiating strategy accordingly.

"If you know your interests and their interests, you can look for that common ground that makes a win-win situation a possibility," Capio says. He adds that determining your vendor’s "walk-away position" will help you bargain. Of course, skilled vendors will also be evaluating you and using this information to improve their negotiating leverage.

Establish a team

Creating a negotiating team with people outside of IT is a strategy many network managers find hard to swallow. After all, who knows the needs of IT better than you?

But flying solo into negotiations is a big mistake.

"A lot of times, the IT guys or women are out doing the deals on their own, and they are really outclassed when it comes to the negotiations," says ICN’s Bauer. "They are great technically, but they just become pawns in the deal because they tend to be manipulated."

Bulk up your side of the table with an experienced negotiator - such as a procurement officer - and a team leader who can prioritize project needs and translate them to a list of contract terms, she says. If you are not the team leader, you should definitely be in a strong advisory position. The team should also have someone from the legal department, a user representative and even a human resources professional if the product being negotiated will require the transfer of people.

Stay one step ahead of the vendor

Demand to see a vendor’s standard contract upfront. A good practice is requiring vendors to submit contracts with their initial proposals.

Be prepared to meet some resistance. Salespeople often don’t let you see the contract until late in the game; they either dismiss it as a mere formality or wait until you are so excited to get the goods that you will turn against any colleague - including the company attorney - who dares to question the deal.

When you get the contract, make sure it includes everything you’ve asked to be included. Don’t be surprised if your trusted salesman neglects to attach equipment schedules, software and maintenance agreements or other crucial supplements.

Make sure everyone on your team understands what is in the proposed contract before sitting down at the negotiating table. This is also a good time to have your company’s legal department prepare the changes you want to see in the contract. Don’t be afraid to bring up these changes during negotiations. "It’s amazing how many customers don’t even realize how much leverage they really do have and the kind of things they really can ask for," Bauer says.

Last, if you hear a discrepancy during the presentation, don’t hesitate to say "we want that written into the contract."

Don’t fight your vendor

Some customers mistakenly treat negotiations as they would a war and the vendor the enemy that must be crushed.

"Sometimes we define a win only in terms of somebody else’s loss," ESI’s Capio says. "Now your interests don’t entirely coincide, but if you approach it as an adversarial event, then you are more likely to strike a win-lose posture, as opposed to a win-win."

Power at the negotiating table doesn’t mean beating a vendor over the head, agrees Rich Glasberg, director of data communications for the Commonwealth of Massachusetts and a veteran negotiator for network goods and services. "The worst thing you can do is start negotiations on a bad note, treating the vendor as if it owes you something. There is no benefit to going in and closing the doors and butting heads."

While you don’t want to go to war, you don’t want to be a pushover, either. Good salespeople are trained to find your soft spots and exploit them.

Establishing a personal friendship is a common ploy for lowering defenses. Once salespeople have gotten your trust, it’s easier for them to get you to accept their word on technical and legal points.

Whatever you do, don’t say you’re in a hurry to get the gear. If you do, you become a victim of a trap you’ve set. All it takes is a few well-chosen words - "The factory tells me it has that item with the specs you want, but they were going to ship it to a customer in Pittsburgh next week" - to get you reaching for the pen. The terms are never ideal, but who wants to wait another six months for a piece of gear that should have been installed yesterday?

Furthermore, no matter how competent or up to the task the vendor seems, don’t tell the vendor it’s got your business until you put pen to paper. "Once you award the deal [verbally], you lose leverage," Bauer says.

What’s the best way to slam on the brakes when you’re feeling rushed by the negotiations? Step back and remove the sense of urgency created by yourself or the vendor.

Be flexible with deadlines, and ignore those brought up by the salesperson. If you are unable to do this, or if the salesperson still tries to rush you into closing the deal, it’s best to go to the vendor’s top-level management. This tactic is also good when lower-level marketing people are dragging their feet, playing games or are otherwise unresponsive to your needs.

Remember, pushing for what you want might not be pleasant, but your smile will be brighter after the contract is signed.

Top negotiating myths By Ian Lamont "We’re giving you our best price." Don’t think for a second that you’re getting the best price by virtue of your company’s size, long-term relationship with the vendor or anything else. A statement like this is meant to discourage you from bargaining down the price, plain and simple. "We don’t need to write that down." This chestnut often involves a "personal" relationship between a well-trained marketing person and the customer’s key manager. After trust has been established, the latter will be willing to accept anything the salesperson says. But once the relationship ends (usually when one of the two parties gets promoted or leaves the company) the customer is stuck with the vendor’s one-sided contract. "We can negotiate later." Give your assent, and you can kiss any future negotiating leverage goodbye. "We’ll do anything for our valued customers." Not if it isn’t in writing. If the vendor insists it’s sincere, then it should have no problem changing the contract to reflect this wonderful attitude. "The price is going up next month." Hinting about an imminent price rise is a scare tactic designed to insert a sense of urgency into the proceedings and encourage you to sign the contract without proper evaluation or negotiation. "Try it for 90 days - no obligation to buy." Who wouldn’t want to get something for nothing? But don’t think it’s free. At the end of the trial period, you’ll hopefully be so dependent on the product that you will not only have to buy it, but also not even consider what the competition has to offer.

Contact Senior Copy Editor Ian Lamont

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