August 23, 2004
(Computerworld)
It was just last year that the London borough of Newham couldn't afford to upgrade its aging Microsoft Exchange 5.5 server. Then Newham contacted an open-source consulting firm, Netproject, for a study to see whether Linux desktops would be a workable option for the local government. By November, there was a credible Linux plan set for adoption, subject to further negotiations with Microsoft.
Last week, Newham announced a new 10-year, $9 million deal with Microsoft. The local government that couldn't afford an Exchange upgrade will now get that, plus up-to-date desktop software, plus a batch of tablet PCs for the borough's social workers.
Now that's bargaining power.
Officially, Newham's decision was based in large part on a Capgemini study, commissioned by Microsoft, that concluded that Newham would not only save a bundle by staying with Windows, but would also have fewer security problems. Yeah, right.
Unofficially, and much more believably, the deal went down like this: Newham had a viable Linux alternative to Windows (and a lot of press attention for being a highly visible Linux poster child). Microsoft negotiated. Newham ended up with a truckload of goodies that it couldn't afford before.
Pretty slick, eh? True, the Linux advocates say they feel used. They're right -- they were used. All the available evidence suggests that Newham's IT boss, Richard Steel, never really wanted to go through the expense and trouble of dumping Windows and all the other Microsoft products Newham was using in favor of Linux and open-source alternatives.
But when Steel went to negotiate the deal with Microsoft, that competing open-source proposal was on the table. It meant Steel could walk away from Microsoft if he had to. He had the power to say no to anything short of the deal he wanted.
Was it a bluff? Only Steel knows, and he's not saying. But Microsoft believed Newham could go with Linux. Microsoft wasn't willing to take that chance. And that got Newham one heck of a deal.
Think you can't possibly get that kind of leverage in your own dealings with software vendors? You're probably right -- chances are, you don't want that much publicity for any IT-related negotiation.
But can you take a few lessons from the Newham deal? Sure.
Start by remembering that if you can't say no, it's not a negotiation. If you can't walk away from the table, you have no leverage at all.
So be sure you always have a viable alternative when you sit down with a vendor. Maybe that means one or more competitors' products. Maybe it means open-source. Or a homegrown system. Or just standing pat. But make sure you can say no.
Then forget about being a nice guy. Use those competitors against one another. Somebody in this deal is going to lose. Make sure it's not you.
Know what you want to get from the deal, what your bottom line is and how much it will take to get you to say yes. But don't say yes until the other guy has run out of things to offer.
Take your time -- the Newham deal took months to finalize. Keep upper management in the loop, so you won't be undercut when somebody gets unhappy at how things are going.
And when the time comes, do the deal and damn the consequences. The losers will howl because they lost. The winners will moan because you squeezed them so hard. That's OK -- you don't work for them.
For the organization you do work for, you may not get a Newham-size advantage. But if Newham can do it, you can too. And these days, you need all the bargaining power you can get. Frank Hayes, Computerworld's senior news columnist, has covered IT for more than 20 years. Contact him at .