I was in an airport restaurant. An ex-colleague happened to be in town and had hour to spare before her flight. We had managed to stay off topics related to procurement and negotiating for at least 10 mins, until Rachel got a call from one of her suppliers.
“I like to drive home a sucker punch when my opponent is on the ropes” she brimmed as she clicked her iPhone case shut. “Guaranteed he calls me on Monday with a better price”. Rachel returned to gnaw on her spare ribs and explain what devious negotiation tactic she had just deployed.
Years ago, Rachel had opted to join the Software Category solely because software was reputed to have the toughest suppliers. I was tasked with mentoring her, but within a few weeks I only had to listen as she mopped up a software vendor’s external legal counsel (the type of negotiator who has a $500 per hour incentive to drag things out). Rachel was a viscous and canny fighter right out of the gate. As she polished off her pork chops, I could see that nothing had changed.
Watch Your Ticker
Rachel’s new employer has a reputation for long hours, ruthless cost slashing and advanced purchasing techniques. She explained that one of her tactics is to monitor her suppliers’ performance on the financial markets. If she notices shares sliding or hears rumours of poor earnings forecasts the sales guy can expect a phone call. “If a supplier is down, we will offer them a deal. Like the guy who just called me back.” I grinned at the thought of her watching ticker screens like some NYSE trader.
Whilst this may be common practice for buyers in commodity markets, in software licensing this level of swift, surefooted opportunism is elusive to all but organisations like Rachel’s. It requires knowing your contracts intimately, especially those that have the potential for mid-term renewals. And the business units must trust Procurement – in the same way most don’t.
Might It Sour Supplier Relations?
Used irresponsibly, this tactic might lead to strained relations with suppliers. But used right, it might be just what the supplier needs.
Regular readers will know that I like to take lessons from our friends in sales. One lesson I particularly love is the one about the ‘bleeding neck’.
Find Those Bleeding Necks
The sales dictum goes something like… find a prospect with a ‘bleeding neck’ problem (i.e. one that is immediate, painful and life-threatening), for which you have the solution, and you cannot fail to close the deal.
In procurement, we are also selling. When selling to our suppliers, our “product” is the big, juicy purchase order we can cut them. One way of having to cut a slightly less big and slightly less juicy purchase order is to approach the supplier when they have a gap in their numbers, that your purchase order solves. Why would they complain about that?
Let’s look at the ethics of this using a simple analogy about selling a second-hand car.
Doing The Deal On The Rusty Old Fiat
Let’s say you have a 13 year-old rusty Fiat sitting on your drive way (which I do, by the way). Your neighbour, Fred, is a sales manger at a Mercedes-Benz dealership and sneers every morning as he drives by in his company E-class.
However, one day things take a turn for the worse for our dear Fred… He got the sack having got caught doing a less than kosher sale to one of his buddies; his wife has left him and wants half the house; and his twin daughters both got accepted to Harvard.
Suddenly, Fred needs a new set of wheels, and a Mercedes is not on the menu. Would it be taking advantage of Fred to hang a For Sale sign on your old Fiat?
When To Approach Your Suppliers
The point I am trying to make here is that we do not need to wait until a software contract comes up for renewal to start talking options with the sales person. In fact, even if the supplier is not having a hard time on the financial markets, it might make more sense to talk about a renewal without the pressure of expiring licence keys.
Who might you want to check in with next week?
(Rachel’s real name has been changed to protect her identity, and I am assuming that neither Fred nor his daughters will read this.)
Image credit: “Ashley Guarrasi Fitness Model” by Edson Hong, Creative Commons, Flickr.com