It's that time of year when many suppliers offer their year-end specials - price discounts and additional goodies - if you sign now. Their motivation is to show year-to-year sales growth and higher incremental profits with a resulting higher stock price.
Driven by this desire to book business before the end of the year, supplier representatives often have the latitude to offer "special-deal" incentives. But remember that vendor reps are highly trained and experienced in using urgency to their advantage. Technology suppliers are well-oiled marketing organizations. Everyone from your friendly account rep up to the vice president is pressured to exceed an annual sales quota.
But for the well-prepared customer, this can be an opportunity.
While the end of the year may indeed be an ideal time to negotiate a good deal, it can also be a trap for the unwary. Haste always makes waste for an IT customer. Don't let a vendor rush you into signing a contract, because you could lose out on further cost savings and contract protections.
Nevertheless, vendors get normally prudent customers to act otherwise by rushing into a contract with lines like: "You know, it's almost the end of the year. We'd like to get your order in this year's business, so we're cutting you a super deal. If we don't get it signed this year, these concessions probably won't be available in January."
The supplier's motivation may be genuine, but it's using a highly effective ploy that's designed to get you to buy now. The risk to the customer is that he can lose focus and react solely to a good price and other goodies, but at the same time he can also give up warranties, remedies for nonperformance and other valuable contract protections - issues that can cost serious money.
There's no substitute for a thorough analysis of a supplier's offer. In addition to the "great offer," consider these three points:
• Is there a legitimate business need for the product?
• Are there incentives offered that can be of value to the business?
• Are the terms and conditions favorable?
More often than not, these year-end specials come up short when it comes to favorable terms and conditions.
Usually, the supplier insists on using its form contract, arguing that it's necessary to close the deal by the end of the year. Even savvy customers have been known to get excited by the year-end hype, cave in and sign the form agreement. But of all the marketing ploys designed to get a signature on a contract, this one can play into the hands of the well-prepared customer.
Keep in mind that the vendor's "super" offer should be considered only a point of departure for negotiations. Begin negotiations the first moment the acquisition is contemplated, not the last. From that point, a persistent and logical pursuit of your concerns will help convince your vendor's salesperson that there is a deal to be made, but it's a matter of "resolving a few things first."
It's also important to recognize that even if both sides would like to do a deal by the end of the year, you must focus on what's truly important, like service levels, warranties, remedies for nonperformance, broad rights to intellectual property, results-oriented support guarantees and absolute clarity of contract terms and conditions. Obviously, this is a key time for your procurement team to prioritize its objectives, gain strong consensus and have all members commit to the negotiating position.
If you have any substantial doubts as to whether the deal should be completed by the vendor's sale deadline, the signing of the contract should be delayed. In many cases, when the vendor has used the end-of-the-year ploy and the customer has refused to sign, that "absolute best deal" has continued to be available for months into the new year. This is especially true when the marketing rep is eager to make that first sale of the new year.
Remember: A time limit on negotiations benefits the best prepared, so get ready for the year-end rush.
Joe Auer is president of International Computer Negotiations Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates users on high-tech procurement. ICN sponsors CAUCUS: The Association of High Tech Acquisition Professionals. Contact him at joea@dobetterdeals.com.