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Monopolizing negotiations

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Several years ago I found myself in a dispute with my local telephone company. Without mentioning names, it was one of the long-distance carriers that had acquired some local telcos to mismanage, mine being one of them. The dispute arose because the telco had cancelled my service after waiting a week to post my on-time […]

By Bob Lewis | May 23, 2005
Topics: Career Management, Industry Commentary, Leadership, Technology | Comments Off

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Several years ago I found myself in a dispute with my local telephone company. Without mentioning names, it was one of the long-distance carriers that had acquired some local telcos to mismanage, mine being one of them.

The dispute arose because the telco had cancelled my service after waiting a week to post my on-time payment, and planned to charge me a reconnection fee. The call center agent couldn’t help me — no surprise there, so I asked to speak to her supervisor, who also couldn’t help me, or chose not to. “I’m stuck with your local service,” I informed the guy on the other end of the line. “But somewhere in your company is someone who cares whether I continue to use your long distance and cellular service. I’d appreciate your connecting me with that person.”

He did, she did, and the telco waived my reconnection fee.

In IT, we deal with monopolies and monopoly-like vendors (MLVs?) a lot. Any time a vendor can reasonably deduce that you’re locked into what it’s sold you, you’re dealing with an MLV, whether the product in question is SAP’s ERP suite, Oracle’s DBMS, or IBM’s Websphere. You’ve made the choice, investing lots of money integrating whatever-it-is into your technical architecture and training your staff in its use.

Many CIOs figure that unless you’re at least the size of Bank of America, you have no leverage and have to take whatever the MLV dishes out.

But, in fact, you do, and therefore you don’t.

Like my local telco, only some of the products and services most MLVs sell are exclusive. Microsoft is a great example: It certainly qualifies as an MLV with respect to desktop operating systems and office suites. So do you have to accept whatever price and contract terms it deigns to offer you?

Before you do, consider everything else Microsoft wants to sell you and has sold you. It wants to sell you the operating software for your servers, instead of Sun, HP, IBM or one of the many Linux-based alternatives. It wants to sell you your relational database management system, MS Exchange, Visual Studio, and a whole bunch of other stuff. You can take as much of your business elsewhere as you’d like.

That ought to give you some leverage. It wouldn’t, though, if you were dealing with the MLV, for which the incremental value of your non-MLV business (or decremental value of the non-MLV business you’re threatening to take elsewhere) is chump change — a rounding error. If you were dealing with the MLV you’d be dealing with a bureaucrat who cares more about applying all rules consistently than about the company’s profit-and-loss statement.

But you aren’t dealing with a bureaucrat, or the MLV itself. You’re dealing with a sales representative hired by the MLV, and sales representatives care about commissions, not rules. That gives you another button to push.

Even if you can’t take your business elsewhere due to vendor lock-in you still have some control over sales volume. “I’m under a lot of budget pressure,” you might say. “I’m going to have to hold off the OS upgrade for a year.” Or, if that doesn’t fit the situation, you’re thinking about server or processor consolidation to reduce software maintenance costs. Or …

I don’t know exactly what the specific bit of leverage you have is. I’m pretty sure of two aspects of your negotiating situation, though. The first is that there’s some carrot or stick you can plausibly brandish at your MLV’s sales representative. The second is that your MLV’s sales representative cares about how much you buy from him or her.

It’s a shame, really. IT executives and managers spend quite a bit of time negotiating with vendors. Even if they’ve gone to business school, though, they’re unlikely to have learned how to negotiate. Heck, many business schools don’t even include coursework in negotiation, even though it’s one of the most important skills a manager can acquire.

So here’s the starting point: You have something the other party wants, just as the other party has something you want. How well you recognize what you have, how much they want it, and how plausibly you can threaten to withhold it compared to how well the other side does the same thing pretty much determines who wins the negotiation.

What’s that? You’ve read that the best negotiations end in win-win situations?

Maybe they do. But that doesn’t mean one side doesn’t win better than the other.


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my photoBob Lewis is a senior management consultant with Dell Services. He has published these columns once a week in one form or another since 1996.

Disclaimer: All opinions, statements, representations, allegations, images (if published) and anything else that appears here is the sole responsibility of the author. Dell has and had nothing to do with it, other than saying it's okay to continue publishing KJR.

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