Negotiation is the one skill every head of IT must
possess to run their department effectively - and that is not
negotiable.
According to Margaret Smith, chief executive of CIO Connect and
former head of IT at Legal & General, the ability to negotiate
is required at every level at which the chief information officer
operates.
"A CIO has to be like a Matryoshka, a Russian doll," she said.
"They have to be a conductor, devising and executing a strategic
vision for IT; they have to be an innovator, able to forecast and
exploit the emerging opportunities IT provides for competitive
advantage; they have to be politicians, able to survive and thrive
in the corporate corridors of power; they have to be accountants,
delivering cost-effective IT to the business; and they have to be
policemen, able to run a tight IT ship."
But all these roles require negotiating skills, whether it is
with business users, suppliers or your own IT staff and managers.
"Being good at negotiation is seen as a business skill, and so IT
people who are good at it are more valued by business," said
Smith.
However, there is negotiation and negotiation. "The old view of
negotiation is that it is about haggling and hassling, beating down
your opponent, getting what you want," Smith said. "I used to be
nervous if the other guy had a smile on his face as it made me
think he had got one across on me and I had missed something."
But that adversarial view of negotiation is counterproductive,
Smith argued. "There should always be a win-win, sometimes even a
mega-win - or you should walk away."
The key, according to Smith, is to know what you want and to
know what the other side wants as well. There is no point demanding
what the other side cannot provide, or afford to provide, as they
too will have their walk-away point.
Knowing what that walk-away point is - or should be - is vital
for your own protection, said Smith.
She recalled, "I was once negotiating for a new mainframe, with
two companies bidding. The bids started at £Xm and went down
dramatically over the next few weeks. Then, at 10.30pm one night
one of the salesmen phoned to ask me just what price it would take
for me to sign the next day. I told him, outrageously, a reduction
of £1m. He said that price would cripple them, but he still came in
the next day with that on the contract. Was this a good or bad
negotiation? Within two years the company had gone under."
It is also vital to understand what the supplier's business
model is, she said.
"I had some of my IT team once come to me and say they wanted to
buy some software for £275,000 from a small company. But when we
investigated we realised that the company would need us to spend
£1m a year with them if they were going to survive," said
Smith.
Negotiating only on price can be a big mistake as well. "If you
are buying a one-off then it can make sense. But remember that if
you do not leave them a win-win and they feel they have been done
over, they will get you back."
Most negotiations are unlikely to be one-off, whether with
business users, suppliers or staff. That is why it is essential to
build a relationship with whoever you are negotiating with, said
Smith.
"I used to believe that social chit-chat, lunching, and so on
was a useless waste of time. In fact it is relationships that make
the world go round. If you have a relationship with the person you
are negotiating with, you will negotiate better."
Nor should negotiating skills be the preserve only of the CIO
and senior IT managers.
"All IT staff should know how to negotiate. They need
negotiating skills when they are discussing things like service
level agreements and business requirements."
Although some IT staff are less comfortable with the idea of
having to negotiate - "techies can find it distasteful," - others
prove to be naturals.
"At Legal & General the then CIO, who is now UK managing
director, wanted some of his team to be sent on an assessment
course for the company's most senior managers, which focused on
identifying skills such as negotiation. The two IT people on the
course got top scores. This changed the business view of IT
management."
Tips to ensure your next negotiations are
successful
- Negotiating skills are a key element in the CIO portfolio and
throughout the IT department
- IT needs to negotiate with suppliers, business users and its
own staff
- Good negotiation leaves both sides happy to continue the
relationship
- No one - IT, suppliers, users or staff - ever forgets or
forgives being burned in a negotiation, so do not make enemies
unnecessarily
- Be prepared to walk away rather than accept a bad deal
- Some IT staff make natural negotiators, others less so - they
need the protection of framework agreements to negotiate
within
- Invest time and effort in getting to know who you are
negotiating with - it will pay off
- A good price is not necessarily the same thing as good value -
something that business users or non-IT procurement experts do not
always take on board. They may need the bigger picture
explained
- Forcing a loss-leading price out of a supplier buying market
share is shortsighted if they then skimp on support or go out of
business
- Salesmen may be motivated primarily by their commissions, not
the long-term good of their employer
- Beware of suppliers targeting less IT-literate business users
in a bid for easier negotiation
- Be wary of too good an initial price - it is the total cost of
the contract over term that counts (especially with outsourcing
suppliers)
- Understand your value as a customer to a supplier, to
understand your negotiating strength
- Understand what is important to you, and to who you are
negotiating with - priorities may be different
- Understand the criticality to your organisation of what you are
negotiating over. A lot of software ends up highly critical, and
highly indispensable, without deliberate intention. A "free trial"
can prove very expensive in the long term if the software becomes
critical or embedded in the infrastructure
- Where suppliers are so powerful in the marketplace that they
will not negotiate on price, ensure other "value adds" are included
such as education or consultancy. If necessary, make it clear you
are signing "under duress"
- Check out all your contracts to avoid nasty surprises at
renewal deadlines
- Increase your negotiating strength by partnering with other
customers to achieve more volume discounts.