Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.
One of the biggest mistakes in IT procurement is down-selecting to a single vendor at the wrong time. If you narrow it down to one vendor too early, you lose leverage. If you do it too late, you fatigue your internal resources and increase the costs associated with the RFP process. As you get ready for new IT initiatives in 2011, here are a few best practices to guide you in the down-selecting process:
Before you narrow down, make sure you have the right mix of competition. Inviting a healthy and competitive mix of vendors to the table is crucial to achieving a fair deal in IT. If you have a preferred vendor, find out what competitors make them nervous and bring them in. It's an excellent way to remove complacency from any existing relationships, while ensuring you get the fairest price and terms possible.
Wait as long as possible to narrow down -- within reason. The minute you down-select to a single vendor, they no longer feel the pressure to be competitive, whether it's regarding pricing, terms or service. Keep competition in the game for as long as possible. That means taking negotiations as far as you can within a multiple vendor conversation -- but not to the point of counter-productivity. Remember, there is a hard cost associated with the time it takes to juggle multiple vendors as well as the effort it takes to keep conversations warm. And, being respectful of the vendors' investments of time and energy is also an important element of this timing decision.
Keep the celebration under wraps. Once you've finally picked a vendor, fight the urge to make that "hey, you just got the deal" phone call. In fact, save that energy altogether -- you're going to need a second wind for the remainder of negotiations. It's important to keep the tone of the conversation neutral, and separate the relationship you've developed with the vendor of choice from the final phase of negotiating. Effective negotiating in that last mile can be the difference between a fair price with terms that match your business needs or overspending and misaligned terms.
-- Gregg Spivack, Director, Client Services, NPI