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How to win at the IT outsourcing negotiating table

Stephanie Overby | June 26, 2012
If CIOs want to get the most from IT outsourcing deals, they need to treat negotiation as an organizational business process--with training, tools, and processes--rather than an IT purchasing arrangement.

Weiss: The organizational capability has to begin with the culture- the context created by the top leaders of the IT organization. It will always be driven by the messages that leaders send, what they pay attention to, what they measure, what they incent. If they consistently send the message to go out there and kick the heck out of suppliers and reward price reductions at all costs, they will get negotiation behavior consistent with this.

If they send the message that the most important thing is to reduce total cost of ownership with certain suppliers or to build new forms value with other strategic suppliers, they will set of the context for a very different negotiating approach. People will pay the most attention to those cultural messages, so CIOs need to make sure the messages they're sending line up with the outcomes they want to achieve. Negotiating as a business process—what does that look like?

Weiss: It only starts with above. Many best in class IT organizations have a defined process for negotiating—a series of steps that take place whether they occur over days, weeks or months. They vary by organization, but tend to include defined activities and tools for preparation, pre-negotiation, negotiation, mid-course correction, closure, review and lesson sharing. I don't hear a lot of CIOs talking about negotiation post-mortems. Why is that important?

Weiss: There are loss reviews, but rarely success reviews—and even the former are often focused more on assessing blame than true learning. Systematic deep dive negotiation reviews are far too rare.

I advise negotiating teams to step back at the end of the negotiation, and sometimes at key junctures throughout it, and spend at least a couple of hours going over what they learned. What strategies worked? What creative solutions were developed or persuasive standards were uncovered that might be reused? What did we learn about this supplier's underlying interests, their approaches to negotiation, and their internal pricing and solution development processes?

What did we learn about how to most effectively keep our organization aligned throughout the negotiation? Developing organizational capability to effectively negotiate involves teams going through each stage of the negotiation process and extracting what worked and what didn't, capturing the key lessons, and sharing these with the other negotiating teams. Some organizations even create negotiation lessons-learned databases. . If you asked the typical IT leader what tools his team uses to conduct outsourcing negotiations, he'd probably pull out his RFP template. Are there better tools for negotiation?

Weiss: Yes, they'd probably pull out their spreadsheets, trade sheets, RFP templates or supplier score sheets. Each of these has a purpose, but they should only make up a small part of your negotiator's toolbox.


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