Negotiating a vendor contract.

Author:Shatz, Debbie
Position:The pace of the future

Contract negotiation is a key activity that frequently fails to receive the preparation or attention it deserves. This very important step in the purchase and implementation of any technology solution is often treated as its own activity, separate from both the selection and implementation phases. This disparate approach does not sufficiently acknowledge the need for buy-in and support from the implementation team. It also does not consistently ensure the agreement is based on the critical areas identified by the selection process, and usually fails to contribute to the relationship-building begun during the selection phase.

Instead of being treated as entirely separate activities completed by unique teams, the negotiation is best managed as an integrated part of the process. After all, it is the piece that bridges the selection and implementation activities, and it affects how your organization will work with the selected vendor for years.

As part of the selection process, the organization should have identified whether it wants to just work with its vendor or be in partnership with the vendor. The key differences between these relationships are how the parties are expected to work together and whether there is vested interest in the success of the respective partner entity.

The organization also needs to define what is needed and desired from the vendor as part of the relationship--not only today, but also in the long term. There is an increasing expectation that a vendor should be a partner and not just a service provider. In those cases, the negotiation process is no longer simply about getting the best price and dotting the last "i," but is about negotiating an agreement that provides long-term success for all parties. With the proliferation of startup and smaller vendors, too many tightly negotiated deals could jeopardize the stability of the vendor and its ability to provide enhancements over the longer term or even to stay in business.

One of the preliminary steps for the negotiation process is to identify the negotiation team. Many organizations use a "one-size-fits-all" approach, where a contract or vendor-management group steps in to take responsibility for the negotiation process.

This method can be impersonal and ineffective by treating every negotiation the same, without taking into account whether this entity is a vendor or a partner. Individuals familiar with this approach advise caution when utilizing the services of a...

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