Stephen has a post here about pricing, about getting close to your vendor and developing a relationship with just a few trusted partners. Nice idea but in any relationship there needs to be some tension to keep it fresh and alive; otherwise you find yourselves doing something because you have always done so, it becomes comfortable.
Now comfort is all very well at home and in your personal life but when you are spending lots of money (your lots will vary) with a vendor, comfort is not good. I have walked into situations where the position has been far too comfortable and ultimately it becomes dangerous for both parties. You need to shake things up once in a while.
- Single vendor relationships are not good to drive value. Competition is key, this does not mean that every bid should be competitive, there aren’t enough hours in the day and everyone gets tired. But every eighteen months, pick a technology area and review it. Do both a technology review and a commercial review. Your review cycles may be shorter, it depends on your work load.
- Review street prices regularly; there are a variety of sources for this, some formal, some informal. Vendors do not like it but they know it happens. But it is important to understand why prices differ; it could be size of organisation or it could be a prestige thing. Let your sales-man know that you are paying above street price and that you are reviewing things.
- New requirements need to go competitive. A sign that things have got too comfortable is that you simply default giving new business to the incumbent.
- Be aware of the market, talk to the incumbent about competitive products; let them know that you are aware of the competition. Attend trade-shows; talk to other vendors, I know sales-guys are irritating but when the incumbent phones up and finds you are in a meeting with their rivals, there will be a moment of doubt.
And when you are doing the deal, here’s a few tips and thoughts. I am not a procurement expert but I have spent a few million here and there on storage.
- List price is meaningless; discount levels are meaningless. Vendors should produce a cost of manufacturer and then try to negotiate a premium on this. Vendors also hate breaking things down by line-item as it reveals that you are paying massive amounts for commodity items. Do not let a vendor flannel you with a cost for a solution, get it broken down and understand what you are paying for.
- Maintenance; you should always be able to negotiate improved maintenance terms. Hardware maintenance is pretty easy to get extended gratis, software is often harder. Review maintenance regularly; if a piece of software is at or close to it’s terminal release, consider dropping the maintenance. If you really need it at a latter point, you can often re-instate, you’ll have to pay the back maintenance but you’ll likely not need it anyway. Make sure this is contractually agreed.
- Technical refresh/take-out; if you are refreshing with the current vendor, only pay maintenance on one lot of kit whilst the refresh is happening. If you are refreshing with a new vendor, agree that the new maintenance/warranty period only starts when the migration is complete. Always try to negotiate a trade-in.
- Software licensing; try to negotiate a pay for the amount you use as opposed to the pay for the whole frame! And always try to agree that software licenses are transferable between frames.
- A vendor TCO model is worthless unless they are willing to guarantee it without caveats. If they think their kit will save you money, skin in the game is key!
- Training; I have had teams which have had more training than any other team in a department because I ensure that any deal is sweetened by the provision of training for ‘free’. Big deals should come with free training and I am amazed at the number of people who do not leverage this.
- One-off-deals; one-off-deals, you know the end of quarter/year specials? We all do them, we all regret them at times. Plan your one-off-deals, you know they’re coming but treat them like a normal deal. You know when the vendor quarters/year-ends are; so try and align your procurement cycles if you can. And I’ve never had the pricing on a one-off-deal pulled because I have missed the cut-off.
- Guaranteed price decline, the cost of kit goes down all the time; ensure that you’ve got a guaranteed price deflator on a quarter-by-quarter basis to reflect this.
You will not get all of the above but at least vendors will know that you are serious, that you are thinking about things. And if your sales-man agrees any kind of special, non-standard terms; get it in writing and keep the evidence. Sales-men move around a lot and the next guy may not honour a verbal, gentleman’s agreement; get the evidence.
I am sure there’s more tricks that I have forgotten or not even be aware of; please share!
