Five ways to get more from your vendor

The economic crisis is negatively affecting software vendors and service providers as much as it is impacting you. Industry experts are now advising IT leaders to take advantage of the tough times and improve vendor contracts by focusing on long-term goals rather than short-term benefits.

In a panel discussion Wednesday, Forrester Research Inc. analysts outlined some of the mistakes that CIOs and IT managers are making during today’s ugly economy as it relates to vendor performance and relationships. With more IT professionals being hunkered down with smaller budgets, the pressure is on to cut costs and do more (or equally as much) with less.

1. Post-contract: Willingness to trade something for concessions

Trying to go back to the bargaining table and negotiate an existing outsourcing or service agreement can be difficult. Paul Roehrig, principal analyst at Forrester, said begging for a lower price or threatening your service provider with strong arm tactics will work, but only in the short-term.

“What clients undervalue are the long-term implications of these tactics,” he said. “Unless you are materially overpaying, there’s not much room for a lower price point without changing your services.”

Roehrig advised IT leaders to think about which technologies they need and try to get rid of the ones they don’t need. For example, rather than signing on with a gold-plated service level agreement, enterprises would be wise to scale back to silver and bronze services.

“If you’re asking for the highest levels of services from everyone across the enterprise, when the reality is that everybody can function well without that, you are wasting money,” he added.

Duncan Jones, senior analyst at Forrester, said that companies with multiple business units – each dealing with the vendor separately – would be wise to consolidate their dealings wherever possible.

“Go to the vendor and ask them how you can earn cost reductions by dealing with them in a more centralized fashion,” he said. This includes handling support calls and contract negotiations with one department, as opposed to multiple business units.

2. Pre-contract: Don’t rush into things

In times of economic crisis, Roehrig said, enterprises will try and speed up some of the things they want to do in an outsourcing deal and skimp on the internal preparation.

“Things like internal management of change, getting all the managers and end-users on-board and keeping good lines of communication open are part of the foundation of a good, healthy outsourcing deal,” he said.

3. Spend in certain areas to save in others

Jones said that IT leaders should put themselves in the vendor’s shoes when entering a negotiation. For instance, enterprises must bear in mind, he said, that the software representative trying to sell them a service contract might have vastly different goals than your organization as well as their vendor.

“He needs to sell you new licences and hardware to keep his job and has no interest in cutting costs,” Jones said. Instead of trying to renegotiate costs first, he advised companies spend in certain areas of need to get discounts or concessions in other, less important areas.