11 minute read7 Mistakes Savvy CIO's Don't Make When Negotiating with the OEM
By paying attention to the details, and managing the process, you have the opportunity to recognize significant rewards.
Just as any project, this one takes time, focus and attention. A savvy IT Leader will not allow these mistakes to jeopardize the maintenance negotiations.
Mistakes Savvy CIO’s Don’t Make
1. Wait until the last minute
An experienced CIO knows that procrastination has no place in negotiation. To get the best deal you can, you must start early. Negotiation is a battle of sorts, but that doesn’t mean the OEM/VAR is the enemy.
In most cases, the VAR can be your biggest ally and can help you successfully negotiate a reasonable deal. To most effectively leverage the relationship, you need to allow them time to work.
Gathering information about the products covered by the agreement is the first step, and that can take time. Ideally, you should begin the process 90-120 days before the expiration date. That leaves sufficient time for you to collect information, make reasonable decisions and negotiate a price.
This is a project that has a hard end-date. As time runs short and you’re faced with a choice of signing or canceling coverage, you have lost almost all of your leverage for negotiating your best deal.
2. Use the OEM provided PDF as your source doc
The OEM, or the local authorized VAR, will likely provide you with a PDF file listing the covered equipment. Whether it’s 3 pages or 100 pages, you don’t benefit from working with a PDF. You’ll need a spreadsheet to be efficient.
It should be easy to get one by asking, but you might need to push a little harder. There is no reason to concede this as the PDF was created from some other doc, and that is what you want.
With a spreadsheet in hand, you now have a doc that can be updated and shared. The work you do in this document will be the foundation for the deal that you make and will also become the single source of truth about your equipment.
Although a spreadsheet is easier to use than a PDF, it would make even more sense to import the spreadsheet into an ITAM product, such as the free offering from Reliant Technology. The accuracy and effectiveness of a spreadsheet diminish quickly when it needs to be shared among multiple team members.
3. Trust the OEM list of equipment is accurate
Now that you have a spreadsheet, the first thing you need to do is verify the equipment list. The list you are provided reflects the best effort of multiple people to track your account activity since the last agreement was signed.
It might be from a year ago, or it might be multiple years of activity. It’s not anyone’s fault that it may have inaccuracies, things happen, but you can’t afford to just trust it without validation. You need to verify it and you’ll need the help of your team.
Once you’ve done this the first time, subsequent years will be much simpler. The first time will be the most difficult. Once complete, your team might find it useful to keep track of equipment changes, which would give you a better working copy for next time.
If you’ve taken the wise approach of using an ITAM for your asset/equipment list, then everyone on your team can have access to it, eliminating the challenges that come with sharing spreadsheets.
Don’t forget to validate the serial numbers too. A bad number could cause confusion when you try to get maintenance done and that’s when you don’t want anything to get in the way of a repair.
4. Your OEM VAR is on your side
While the VAR can be a well-trusted resource, and they usually value your business, maintenance contracts add special challenges. When it comes to maintenance, the VAR can become boxed into the middle.
It really depends on how well the OEM compensates the VAR for maintenance and maintenance contracts, and what the OEM sets as expectations for VAR performance. Your best path is to pretend you’re negotiating directly with the manufacturer and using the VAR as your messenger.
Taking the approach of “don’t shoot the messenger”, treat the VAR as your partner and, if necessary, portray the OEM as your enemy. Using appropriate terminology can work to maintain a good VAR relationship. Avoid “you need to” when pushing for price changes and make it “the OEM must”, to show that you understand they’re not making all the decisions.
It is beneficial that you maintain a solid relationship with the VAR.
5. Trust the OEM to give you their best price
It will take several iterations to get the best pricing, and you can expect that it won’t come in on the first offer. Try to be flexible on coverage options to better understand the components of the price. Don’t be afraid to mix things up and see how the numbers come out based upon different scenarios.
With your equipment accurately identified, you can experiment with various coverage options and response windows to get to your ultimate goal: risk mitigation at a reasonable price. This is an excellent time to invite a TPM (Third Party Maintenance) Provider to submit a proposal. Negotiating is always easier with your eyes wide open, and a TPM proposal can really open your eyes to the marketplace.
Laws today typically prevent an OEM from withholding firmware or software updates, especially if security updates are involved. There are many companies that rely on a TPM for day to day support.
Sometimes multi-year agreements are more beneficial but be sure that there is an easy way to cycle equipment off the coverage as you replace it. If your current equipment has multiple coverage end-dates, you should try to include language in the new agreement that allows you to set up contracts to co-terminate expiry dates with the new agreement.
6. Treat all equipment as equally important
This one is Risk Mitigation 101. Your equipment list is probably a myriad of stuff ranging from business critical to business “who cares?”. You need to know the current business importance of each. You’re likely to find that some of your equipment is going End of Service Life (EoSL) during the proposed maintenance contract.
Based on business changes, technology plans, and project portfolio, you should be able to reduce your maintenance costs each year. Using a TPM is an important element in this strategy.
Your ranking of equipment should also lead to fine-tuning both the OEM and TPM (Third Party Maintenance) proposals. A TPM may be more effective at protecting your equipment and budget while you prepare for a planned technology upgrade.
There is always a plan for rolling out new stuff, but it rarely catches up with the EOL plans of the OEM. Don’t make the panic mistake of upgrading pieces and parts just to get your maintenance agreement in line. Stick with your plan and let the TPM fill the void.
Effectively categorizing equipment, mixing self-insurance strategies with OEM and TPM coverage, will ultimately give you the best results. Depending on the volume of equipment you have, using this strategy can provide a valuable source of cost savings to fund other initiatives.
7. Negotiate your best price then sign so you can move on
Once you’re satisfied that you’ve gotten the best pricing from the OEM and TPM, and have selected the right coverage for your business, then it’s time to sign…almost.
There are a few more questions to ask…
“Can you give me any additional discount for signing early?”. If you started early, you should be done before the old agreement expires, see if that gets you anything.
“What about a multi-year agreement?”. If your goal is a one-year agreement, ask for a multi-year option. In most cases, a multi-year agreement will reduce your annual cost slightly and not require you to prepay future years.
A multi-year agreement usually locks in the rates for subsequent years. The big benefit here is that you don’t have to repeat the negotiation process annually.
Once you have the opportunity to utilize these practices, you will have all your contracts and assets organized in one centralized ITAM solution; and you will have a mix of both OEM and TPM to support your equipment in a way that makes the most sense logically and economically. This gives you two competent maintenance providers that you can leverage to your advantage.
Spreading out support responsibilities between two providers is an excellent strategy for long term success and enables you to better manage price and performance moving forward. You obviously need protection from outages, but you also need protection from runaway costs. A TPM helps you think outside of the traditional OEM ‘blank check’ approach and gives you the flexibility to right-size your coverage.
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Reliant delivers support offerings that are a perfect solution for this scenario. Contact a professional today to learn more and request a quote. One of our storage and maintenance experts will contact you promptly to discuss your unique needs.
Also, if you are not using ITAM software (or you’re interested in upgrading), check out RTAM, Reliant’s FREE IT asset & contract management platform. Click here and a representative will contact you to schedule a demo. Or, if getting right to it is how you roll, go ahead and sign up for free.