To ensure the best solutions are obtained at the best price, it’s important to negotiate from a position of knowledge and strength. Negotiations should include far more than price. In fact, in many ways the price for the solution(s) is the easy part. It is often the less tangible elements of an agreement that require more careful consideration.
Below is a list of items it may be advisable to bring up for discussion with a solution provider. It may not be possible or relevant to include all these clauses, but each is worthy of some discussion, as least internally.
Never negotiate with just one provider, as you’ll be guaranteeing monopolist pricing.
If the product includes software (and many do), have a copy of the code placed in escrow, ensuring you own the source code in the event the provider files for bankruptcy or is acquired by a competitor. The latter may be unlikely but it doesn’t hurt to ask.
Obtain commitment from the provider regarding the people who are to be assigned to the project. Some turnover may be natural at the provider, but you should seek to protect yourself in the event that a large number (or all) of the experts are withdrawn from the project. Vendors are often resource-constrained, and may prefer to move their top players around to ensure they can win more deals. Ensure you have some control over the resources (number and quality or expertise) assigned to your project.
Ensure the team assigned to you can match your scheduling needs. Some vendors may try to subtly or not so subtly shift starting dates to accommodate their schedules rather than yours. Consider adding clauses to the contract calling for reduced fees in the event the provider’s staff are unavailable on an agreed-upon date.
A corollary to the point above is that you must ensure your personnel will be ready on time. If you seek fee adjustment due to date slipups, expect the vendor to seek reciprocity, possibly expecting higher fees if there are delays on your end.
Seek assurances on up- and down-times for the product post-implementation. If there are more than X “downtimes” in a given year you may have an option to cancel and or pay lower fees the next year.
Ensure provider has acceptable support hours. Will there be local, regional, or international support? Will your local hours of operation be covered?
Reach agreement on timeliness of support responses. For example, you may wish to have all issues resolved within 24 hours of initial notification. Alternatively, perhaps an agreement that issues will be acknowledged within two hours and resolved within 48 hours?
Ensure appropriate language support is available, both in the products and in verbal or written support. If special language support is critical, it must be an explicit and enforced part of the RFP or evaluation process.
Reach explicit agreement on what is included in fees and licenses, and what is not included, to avoid misunderstandings. For example, are you eligible for all product upgrades during the license period, or do you have to pay additional amounts? If further implementation work is required to implement an upgrade, will you or the provider foot the bill?
Reach explicit understanding on who is responsible for payment of taxes. Sometimes a vendor will know less about the local tax environment than you do. Be very open about all relevant taxes to avoid subsequent finger-pointing.
Arrive at a very explicit understanding regarding who is responsible for payment of various expenses, such as travel, photocopying costs, rental of presentation or training rooms, etc. For example, if the provider has a local office you may point out that reimbursement of international travel fares shouldn’t be required. Similarly, if the provider claims a local presence it shouldn’t be necessary for you to reimburse hotels and meals.
Reach agreement on the permissible extent of annual price increases: consider tying these explicitly to inflation indices, as available.
Seek to have training included in the price, for multiple generations of users. Keep in mind that natural staff turnover in your firm may make it necessary to train additional people on an annual basis.
The larger the contract, the more clout you will have in negotiations. This is relevant if you are seeking broader offerings, and are willing to consider having your needs met by just one vendor. An advantage of doing so is the greater likelihood of seamlessness across the suite of products (Seamless integration may not be possible in practice, regardless of assurances provided by a vendor. A proof of concept can assist in this evaluation). A disadvantage of seeking multiple solutions from a single vendor is that there is more vendor risk in the event the vendor underperforms. Furthermore, most vendors are very good at certain products, while other modules they offer may not represent “best in breed”.
Ascertain what kind(s) of insurance the provider has (including coverage limits), in the event the provider’s omission or commission causes damages.
Find out what guarantees or warranties are available from the provider.
Consider asking for a performance bond if that gives greater comfort for successful completion of the project or access to financial compensation in the event of project failure.
While tough negotiations are encouraged, the point should not be to fleece the provider. The more contentious the arrangement, the more likely it is to fall apart, harming both parties. Seek a fair and honorable outcome that works for all concerned. In the long run, this will be far more cost effective than a relationship in which you set out to take advantage of each other.
