Filed under: Negotiations | Tags: Bargaining Table, BATNA, Carrots, Cisco, Claiming Value, Cooperate, Creating Value, Defect, EMC, HP, IBM, Microsoft, Negotiate, Oracle, SAP, Sticks, Supplier Lock-in, Win-Lose, Win-win, ZOPA
In negotiations, whether we realize it or not, our cooperation increases the size of the pie for everyone (creates value) and our defection defines our slice of it (claims value).
We often develop imaginative ways to create value through the promise of mutual gains and introduce these ‘carrots’ into our negotiation strategy at the appropriate point as to maximize their impact and benefit. As it relates to cooperation and the use of carrots, most of us consider ourselves fairly effective with this approach.
What happens when the other party isn’t cooperating, however? Are we as effective at bringing them back to the bargaining table? Are we as capable of putting the deal back on the tracks?
Quite simply, what happens when they say no when we really want them to say yes? How do we move them to our way of thinking? That is the art of negotiation. The art of letting *them* have *your* way.
Former Secretary of State James Baker once famously said (and I’m paraphrasing here), Diplomacy is the art of saying nice doggie long enough until you can find a big rock with which to smash it in the head. If there is no rock, negotiation is pointless… How many of us negotiate without a rock? I can’t tell you the number of times I’ve had a client say we’re just going to tell our supplier we want to buy their stuff, but we need a better price. I nod politely and ask, “or what”? Puzzled, they ask, what do you mean “or what”? I explain, and what if they say no? What if they say this is the best possible discount they are able to offer you? What will you do then?
You see, the “or what” is the rub. Gee Mr. Supplier, we’d like you to give us a better discount. If you’re not prepared to answer the “or what”, you are just Oliver Twist asking for more. Seemingly, we are much less prepared to correct behaviors that are counter-productive to our goals and objectives. The use of ‘sticks’ in a negotiation is every bit as important as carrots, and in many cases, much more so. When one party cooperates and the other party defects, the defecting party claims value. When both parties defect, not only is no value created, no value is claimed either. It stands to reason then, that you can prevent the defecting party from claiming value by defecting. Sometimes the best way, perhaps the only way to bring a defecting party back to the bargaining table is to defect yourself.
Easier said than done? Defection in a negotiation is often viewed with a negative connotation, and is also often confused with the end objective. Some view it as confrontational or even as threatening. Regardless of how it’s viewed, a defection strategy is often justified. Defecting from a negotiation can be extremely effective in situations where a supplier is reaching or over playing their hand.
In one case, NET(net) was working with a client who had two viable solutions for a business need, and the preferred supplier overplayed their preference status to the tune of a 40% premium price over the competition. The client told the preferred supplier that the current price made it impossible for them to be selected, but the supplier refused to lower their price, believing that the client was bluffing. Instead of haggling, the client sent a polite thanks but no thanks letter, and went into unilateral negotiations with the alternative supplier with the full intent to get a deal done. The preferred supplier returned the next business day with a market leading price and improved terms and conditions. This led us to coin the negotiation axiom, “sometimes the fastest way to a yes is to say no”. This client didn’t bluff. They had every intention to do the deal with the alternative supplier and the preferred supplier knew it. It’s not gaming or brinkmanship; it’s defection. To be effective, it has to be credible, it has to be timed right, and it has to be sequenced appropriately. When it’s done right, it works.
While we are mostly inclined to be cooperative and we all work hard to find ways to increase the value and mutual gains for all parties involved in a negotiation, the use of sticks on a quid-pro-quo basis is an extremely effective way to control the bargaining table. Defections from negotiations are sometimes the best and perhaps the only way to break the cycle of supplier lock-in and the incumbency effect of entitlement rights. See future blog posts on these and other topics.
Filed under: Data Center, IT Financial Management, IT Strategic Planning, Microsoft, Negotiations, Oracle, Outsourcing, Risk Mitigation, SaaS, Software, Subscriptions, Total Cost of Ownership
Microsoft is aggressively discounting its hosted / SaaS solutions in order to gain market share, and I suspect, to sway customers from the EA / Select / perpetual license model, onto the rental / cloud / SaaS model.
Microsoft cuts prices on BPOS, to issue refunds -
http://ct.zdnet.com/clicks?t=475224883-f5935ee3a0b078029592318f09b1ea8e-bf&brand=ZDNET&s=5
Microsoft seeks to lure Salesforce, Oracle users with six months free of CRM Online
Microsoft chops prices of its hosted enterprise cloud offerings
But you’ll note that’s only on the hosted offerings.
Also of note, Microsoft’s huge new billion $ datacenters in Chicago and Dublin are now open for business. With more coming soon.
http://ct.zdnet.com/clicks?t=475224883-f5935ee3a0b078029592318f09b1ea8e-bf&brand=ZDNET&s=5
On the traditional licensing front, Microsoft just announced price increases for SQL Server.
So, clearly, MSFT is betting big chunks of cash on swaying customers to its hosted services, and as a consequence the traditional licensing models are becoming slightly less attractive. I would advise Microsoft customers to consider the true costs and benefits of moving from a traditional licensing approach, to a model such as BPOS. As in most things regarding Microsoft’s sales practices, there are hidden factors that may not come to light unless you ask the right questions.
-Scott Braden
Filed under: IT Financial Management, Negotiations, Oracle, Risk Mitigation, Service & Support, Software, Total Cost of Ownership
It appears Oracle has increased its due diligence in the area of auditing customers. On the one hand, this exercise may be helpful (as Oracle will profess) in enabling customers to better understand holistically precisely what their entitlements are and to what degree those entitlements are being leveraged. This is useful information that many customers often struggle to reconcile on their own, and could shed some light on where opportunities for downsizing of entitlements might occur.
On the other hand, customers should be cautious. In a down economy, where the volume of deals and overall license spending is lower than desired, auditing is a means by which Oracle may be hoping to find opportunities for incremental licensing events. Especially for customers who either may not have been positioned to actively keep track of utilization trends over time, or who may not be familiar with original agreements and the parameters of utilization in these agreements, Oracle will be seeking to capitalize whereever possible to bring your license entitlements and utilization back into compliance.
Resolving compliance issues is likely to be done through a new licensing event. Unlike a situation where a customer may be giving Oracle an opportunity to earn additional licensing business via a purchase that is not the result of an existing contractual obligation to Oracle, it is more challenging to negotiate a favorable license arrangement to adress compliance matters. In fact, with certain product families, it is likely that the costs associated with the need to add incremental licenses has already been identified. With other product families, Oracle is likely to use its standard list pricing as a starting point, and given that the absence of the licenses constitutes a breach of contract in a compliance situation, they are not under as much pressure to discount. This puts the customer at a disadvantage, not only as it relates to the new license cost, but the associated maintenance costs related with those new licenses too – as the maintenance and support services costs are generally based on the net license value.
Customers would be well advised to invest time in assessing their license entitlements and utilization, and truly ensuring the parameters of their licenses are well accounted for, in advance of Oracle aggressively pursing completion of an audit. If misalignment is identified, and you find that you will require additional licenses to ensure your utilization needs are met into the foreseeble future, it is better to address that with Oracle proactively with bringing a new license opportunity to them. Given the possible stakes, this may be an area where enlisting professional help may be a worthwhile investment to either a) ensure you have no exposure; or b) help you address any potential exposure in a way that is most optimal for your organization.
Filed under: Convergence, Negotiations, Service & Support, Telecommunications, Universal Communications, Voice Over IP | Tags: billing, carrier, poor, service, Support, telecom, Telecommunications
It was one of those days that are occurring with more frequency, with a couple more clients dumping on me about poor service from their telecom provider. I spend a lot time engaging with the telecom providers day to day working on behalf of my clients and often experience this poor support first hand. But I have the benefit of seeing this service from both the client perspective and the perspective of the account representative who is often struggling against the tide to maintain a decent level of support for their various (and increasingly numerous) accounts to manage.
This is nothing new of course. The carriers have been notorious for poor account support, particularly if you are in the dreaded small to medium business category (which, of course, makes up the majority of the accounts for the telecom provider), and billing issues have always been the bane of the industry with many archaic and legacy billing systems supporting the load.
However, a comment I received today from a long term client that I respect and whose opinion I value really struck me, “I’m trying to do some simple things like cancel a couple of obsolete circuits and no one appears to understanding how to handle something so basic”. He goes on, “I get transferred around and I have to repeat my request to someone that does seem to have even the most rudimentary knowledge to handle my request.”
This is just one example and only the most recent issue I hear of many problems weekly. I hate to hear this because in our work at my company, NET(net), we are often in the position of recommending a particular carrier for new services or we are working to get an incumbent carrier to provide a better economic and value proposition for our clients.
Yes, there are telecom providers that do it better than others, but all of them seem to run hot and cold. And good account support is often a function of a good account manager that can carry the load on behalf of their customer and shield them from all the dysfunction in the carrier organization.
One thing is seemingly for sure: the industry is moving in the wrong direction and is not endearing itself to the customers. This sounds like an opportunity to me. I have a responsibility as a professional to point out these issues whenever the opportunity presents itself as an advocate for my clients in my interactions with the carriers. But there must be a business model out there waiting to happen to not only provide a relevant, quality and affordable telecom service, particularly from a financially stable provider, but to do so with a high touch, friendly, non-bureaucratic approach.
Is this telecom business out there? Do you sell wireline, wireless mobility or managed services and think you’ve got it figured out? If so, I’d like to hear from you.
