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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.

There are better tools for preparing for negotiation, aligning internal stakeholders, choosing and responding to negotiating tactics, and making adjustments. Many of our clients have developed negotiation playbooks. Some are focused on systematically preparing for different kinds of negotiations.

Others are focused on choosing the right strategies for any given negotiation or "changing the game" when facing tough tactics. Some have defined methodologies for conducting pre-negotiations. Still others have developed simple, yet powerful mechanisms for assessing progress and making adjustments during the negotiation.

Some companies use these just for big, complex negotiations, but many have standard negotiation preparation, job aids, and templates that they provide to all of their negotiators.

If you're going to approach an outsourcing deal saying, these are the SLAs, we want to use these are the benchmarking clauses, and the price and terms must be this; hear the vendor's counter offer; and then split the difference — you don't need much of a negotiation process. But if you're trying to reduce total cost of ownership, create new forms of value, jointly manage risk, or innovate, you need an organizational discipline that enables your negotiators to uncover interests, develop creative options, employ persuasive standards, develop trust, and successfully align stakeholders.

This is what skilled negotiators get paid to do, and they need to be supported by a consistent set of incentives, an efficient enabling process, proven tools and strategies, and an organizational decision-making process in line with these goals. So if I send the right messages about what I want from my negotiators and put the right tools and processes in place, will everyone in my organization be a good negotiator?

Weiss: Skills are required, too. You need people who are not just effective at using the preparation tools or strategy playbook, but are skilled at the negotiating table.

Shy of someone who is simply doing commodity purchases, negotiators need creativity. They need to be capable of having value-creating conversations. They need to be able to extract what the other side's actual interests are, not just their positions or demands. They need to be joint problem solvers. They need to be willing to consider another angle. (Being open to persuasion, ironically enough, actually makes you more persuasive.)

These skills can be taught and practiced. And the process, tools, and mindset pieces must come together in an integrated way to drive consistently successful negotiated results—what we call "return on negotiation." That ability to see things from multiple angles and consider alternatives can easily get lost when negotiating under stress—when an IT leaders is looking seeking a price reduction from a supplier, for example. How important is it for IT negotiators to seek win-win solutions?


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