Share the Spoils

Computerworld - Face it: Your suppliers' costs are your costs. While you can't directly affect their R&D, marketing or raw materials outlays, you can significantly affect their sales and delivery expenses. In return for reducing your suppliers' costs, you should expect lower prices and more consistent service.
The sales process is very expensive for both buyer and seller. Established low-growth software firms typically spend 20% to 25% of revenue on sales and marketing. High-growth firms often spend as much as 40% to 60%. Here's how you can help reduce your suppliers' sales costs:
• Be specific. Before you contact potential suppliers, define project parameters (objectives, scope, schedule, etc.) as clearly as possible. Suppliers will waste less time guessing what you want and will build less contingency cost (stated or unstated) into the contract.
• Be honest. If you have no intention of purchasing, tell the supplier upfront. Allow it to focus its sales efforts on other prospective customers.
• Be consistent. Don't change your mind unless absolutely necessary. Reworking a proposal costs both sides time and money.
• Limit requests for proposals. Use formal RFPs only for large projects or for projects where preferred suppliers are unable to deliver. RFPs are expensive to create, expensive for suppliers to answer and expensive to analyze.
• Negotiate master agreements. A standard master agreement allows you to focus on project-specific negotiations, rather than on standard contract terms and conditions (liability, insurance, nondisclosure, etc.).
• Centralize buying. A central vendor management group standardizes and streamlines buying processes. It also helps vendors focus sales efforts and reduces duplicate vendor cold calls.
• Help trusted suppliers sell. Introduce valued suppliers to potential buyers within your company. This reduces the supplier's sales costs. Moreover, if your supplier is selected, you benefit from working with a known entity.
You can also affect the supplier's delivery costs. Reducing these will win you points with your supplier and should place you in a favorable negotiating position for subsequent contracts. Here's how:
• Standardize configurations. One client supported 21 custom desktop and laptop configurations. Its reseller had to carry significant inventory for each configuration. Standardizing on eight configurations saved the reseller huge inventory costs and reduced installation, training and troubleshooting time. The standardization saved the client 12% of its overall PC costs.
• Standardize software. Industry-standard products are less expensive than proprietary ones. They require less support and less custom software to interact with other products. Eliminating custom interfaces reduces costs.
• Develop realistic work plans. IT suppliers attempt to keep their people