Negotiations Pioneer Announces New Course

(Orlando, FL – 04/08/10)  Today, procurement and technology negotiations pioneer International Computer Negotiations (ICN) announced the addition of a new advanced course to its curriculum.  For 35 years, ICN has been training Global 1000 companies in how to Do Better Deals, and its new SLA Lab: Results-Based Contracting was developed to teach best practices in the use of service level agreements with suppliers.

CEO Joe Auer states, “Early in the acquisition process, effective negotiating teams must agree upon the concept of which contractual approach they will use to drive the deal. ICN’s advanced training course SLA Lab: Results-Based Contracting helps you understand the difference between contracting for resources and contracting for results and shows you how to implement a ‘results deal’.”

This “results versus resources” decision establishes which side of the bargaining table will bear the responsibility for the outcome you’re expecting from the deal. In a “results deal,” the vendor is responsible, while in a “resource deal,” it’s the customer.

Auer continues, “In SLA Lab, you’ll gain an understanding of critical elements that can help you shift risk and responsibilities to the vendor and monitor ongoing compliance.”

The training classes are open to the public and are available privately all over the world. The first class will be conducted in Chicago (May 27-28, 2010) at the AMA. Registration information along with a detailed outline is available at http://www.dobetterdeals.com or 407-740-0700.

Since 1975, Winter Park, FL based ICN has provided critical training and consulting in IT procurement, vendor management, and negotiations, establishing a reputation that sets it apart from the competition.  Internationally, ICN has presented both public and customized on-site seminars in countries around the world including the United Kingdom, the Netherlands, Malaysia, Canada, Australia, New Zealand, Hong Kong and Singapore.

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Tyrus Cooper

ICN PR

1133 Louisiana Ave

Suite 100

Winter Park, Fl 32789

1.407.740.0700

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Gunslingers and White Knights

Every now and then, we get requests for recommendations of firms who do work on a contingency fee basis – that is, their compensation is tied to the amount of savings they obtain for their client.  You know the firms – the ones that ride into town on their white horses and promise to save the day by giving you that silver bullet: a bundle of cost savings. Clients falsely believe that such an arrangement is a no-lose proposition for them.

We’re not advocates of the contingency fee approach because the consultant is solely motivated to obtain the lowest price for the client.  While this may work for utility audits, it doesn’t work in IT contracting.  This approach does not take into account other risk factors which could adversely affect the client. Getting better deals means getting both excellent terms and prices.

A contingency price engagement is not in the customer’s best interest – it could incent some negotiators to focus exclusively on price and the “cheap deal”, which almost always foregoes much needed contractual provisions for the customer.  There is a balance between price and protection in every deal.  If the focus is exclusively on price, there is an impact on critical functioning of strategic issue deliverables that include, but is not limited to: terms and conditions, quality issues, service level agreements, remedies, warranties, etc.

Our advice is to avoid contingency fees based on cost savings because:

  1. Often the cost focus clouds the key strategies for doing the deal.
  2. The quality aspects of the agreement are often neglected.
  3. It provides wrong incentives for negotiator to seek good remedies.
  4. In software long term savings are often obtained by solid, long term provisions that address future pricing, rights of use, movement of software to another location and/or machine.
  5. It is difficult to determine ‘what is the basis for cost savings’.

            So before you think of these gunslinger consultants as knights in shining armor, think twice.  They may not be offering you such a great deal after all.

Work out details later? No! Now!

By Joe Auer

Suppliers often skillfully avoid tougher service-level guarantees by convincing the customer that service-level agreements (SLA) should be negotiated after a 90-day transition period. The supplier convincingly argued that service levels could be better determined once it understood the customer’s operations.

Suppliers suggest that the two sides work together to identify service levels during the transition. The customer many times falls for this, believing that information gathered during the transition period would produce more favorable SLAs. The customer signs a contract with no specific SLAs, no “out” clause if the two parties failed to agree on service levels and no recourse if the supplier failed to perform.

And guess what usually happens! At the end of the transition period, the supplier is willing to sign only a few weak SLAs with no remedies. For example, the supplier agrees to make applications “generally available” and that help desk calls would be answered “as soon as practical.” As you might suspect, the supplier escapes accountability with these “commitments” because no one could agree on what those terms really meant. As a result, the customer ends up with a multiyear contract that heavily favors the supplier.

To avoid this kind of mess, start with specific SLAs and remedies in your request for proposals. Let a qualified supplier perform due diligence of your operating environment under a nondisclosure clause as part of its preparation before making its proposal. A supplier’s bid should be based on your required SLAs, which should at least match the service you are currently receiving. In most cases, the SLA should exceed the current levels because you’re considering services provided by “experts.” The key is to specify desired service levels up front, early in the supplier evaluation process.

The critical error is signing a long-term contract without agreement on a fundamental issue – service quality. With a signed contract and no SLAs, a supplier won’t be motivated to guarantee exemplary service, only a minimal quality commitment that would leave the customer without meaningful recourse for unsatisfactory service.

JOE AUER is president of International Computer Negotiations, Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates Professionals on IT Procurement, Sourcing, and Vendor Management. ICN sponsors CAUCUS: The Association of Technology Procurement Professionals. Contact him at joea@dobetterdeals.com.