The Practical CIO: A Common Sense Guide for Successful IT Leadership

Chapter 5. Before Negotiating, Do Your Homework

Executive Summary

Very few CIOs relish the prospect of negotiating contracts with suppliers. Even fewer of them enjoy renegotiating contracts. But in a difficult economy, sometimes you need to bite the bullet, call a supplier and say, "You know, this deal just isn't working." That's when you need all your ducks in a row, because renegotiating a contract requires more than courage—you need to know precisely what you're trying to achieve and be ready to offer alternatives.

No Two Suppliers Are Alike

Bob Turner, the CEO of Smart Software Deals LLC, is an expert at negotiating IT supplier contracts. So I asked him to tell me what every CIO needs to know before they begin negotiating with a supplier.

"To start off, the CIO needs to understand that supplier. Every supplier has its own way of structuring deals, pricing software and services, and negotiating contract terms and conditions with their customers. So the first thing that a CIO needs to do is to figure out how each supplier approaches the table," says Bob.

Long before the negotiations begin, the CIO has to decide if the relationship with the supplier will be strategic or tactical. The CIO must look in the mirror and ask, "How important is this supplier to my organization? Will I be counting on this supplier to help the enterprise achieve its strategic business goals, or am I only hiring this supplier to fix a short-term problem?"

After the CIO has identified the supplier as strategic ...