IT Management Reference Guide

This is the second of two sections on the art of negotiating. Part one offered a brief explanation of common barriers to reaching agreement on any negotiable issue, and continued with some methods for building rapport between two negotiating parties. In this section I explain three important aspects of negotiation: positional bargaining, determining best alternatives, and identifying zones of possible agreement.

As previously mentioned, some of the material in this section is from the Harvard Negotiation Project sponsored by the Harvard Business School. Harvard initiated the project as a result of the high number of expensive lawsuits that were being litigated across the country. Project participants found that enabling litigating parties to settle out of court through effective negotiation was far more beneficial, and economical, then conducting expensive, time-consuming, and often frivolous lawsuits. The concept of the project was that the more that people understood and practiced sound negotiating skills, the better off society would be in general.

Positional Bargaining

Positional bargaining involves the choices you make on a variety of issues prior to the negotiation, positions that can help or hinder the progress of the discussions. Some typical issues are: do you view the opposing party as a friend or an adversary; do you perceive the end goal to be an agreement or a victory; will you be offering concessions to cultivate the relationship, or demanding concessions as a condition of relationship; will you be making offers, or offering threats. The initial position you take often determines the pace of progress in a negotiation. When two opposing parties take a very hard line with their initial positions, stalemates frequently occur. For example, an end-user may insists that their online system cannot be down over a weekend even though an IT database specialist insists that if he does not perform mandatory maintenance databases will likely become corrupted. These two relatively hard lines will result in a deadlock until one or both parties adjust their positions.

An approach referred to as 'negotiating on merits' adjusts a person's position by trying to find a middle ground between the extremes of positioning bargaining. This technique attempts less at compromise and more at trying new approaches, e.g. instead of viewing the opposing party as either a friend or a foe, view him as a collaborative problem-solver; rather then agreement versus victory, try to arrive at a worthwhile outcome that is efficient and amicable. In the example of the end-user and database specialist, they may determine that only one database needs to up during the maintenance period, and that a temporary copy can be used and later imported back into the original set.

A real life IT example of negotiating on merits occurred with me a few years ago when I headed up the infrastructure group of a major company. We had run on company X's servers satisfactorily for several years, and were at a point where we needed to triple our capacity for much needed, and long over-due, enterprise applications. Factoring in anticipated growth over the next five years brought our estimated costs for new servers between $2-3 million. I approached company X with my requirements, fully expecting they would offer a competitive bid to remain the incumbent vendor. Their only serious competition came from company Y who began marketing their products and services very aggressively. We had never used company Y's products where I then worked.

My initial position was that I really did not want to bring in a second vendor. We were already locked in to company X with our legacy systems that would be around for several more years. Going with a new vendor would mean additional costs for training, or hiring experienced staff, or both. But along the way, two surprising things happened. One was that company Y was far more aggressive than I had anticipated, slashing their purchase and maintenance costs down to incredibly low figures, extending the give-back period from 3 months to 6 months, and putting in writing their claims of industry-setting performance and scalability. The other was the surprising lack of any significant marketing efforts by company X, the incumbent. They presumably felt that they had the deal wrapped up, and while their offering would have been competitive in a normal bidding situation, it was no match against what company Y was offering.

The upshot was that I eventually awarded the contract to company Y. Its claims about support, performance, reliability and scalability all proved to be true, and validated the decision. If I had not adjusted my original position from a very rigid hard-line of not being open to considering a non-incumbent vendor, the company would have lost a great opportunity. As it turned out, the company and the vendor both ended up winning on this deal.

Determining Best Alternatives

An important part of preparing for a negotiation is determining possible alternatives to the desired outcome. One should include in this the bottom line value, sometimes referred to as the best and final offer. The reason this best alternative is so important is because it needs to be the firm amount (or the final term or condition) from which you will walk away from the negotiation if it is not met. In the IT arena, this may be the point at which you escalate your negotiation to senior management.

An experience I had evaluating large-volume storage suppliers will serve to illustrate. The company I worked for was enjoying rapid growth and approved substantial funds in my in infrastructure budget for a huge disk storage contract. My technical support team itemized all of our requirements in a request for proposal (RFP), and sent it out to five well-known disk suppliers. One of our non-mandatory requirements suggested that the prospective bidder provide an onsite demonstration of their equipment. This would allow us to 'kick the tires' so to speak by verifying the unit's compatibility with our own equipment and validating its performance claims. Four of the five vendors agreed to conduct these onsite tests.

My first reaction to the vendor who declined was that this would not help their cause. Their explanation only made matters worse. They stated that since their inventory was low and demand for their product was high, they could not afford to free up valuable equipment for a proposal that was not yet a sure thing. The arrogance of the vendor continued with its total unwillingness to reduce its inflated costs for purchase and maintenance. The enterprise I worked at was a Fortune 50 company that would be a marquee account for any of the bidders, yet this particular vendor's marketing team was making little effort to secure what most considered a plumb of a contract.

During the course of the evaluations, we eliminated two other vendors who could not meet several of our mandatory requirements. We eliminated a third after confirming poor performance results with independent laboratories who conducted extensive tests for clients at their labs in northern California. Down to the last two, we conducted thorough customer interviews with 5 to 10 clients of each finalist. Surprisingly, the vendor who refused to test onsite received far and away the highest reviews from their customers. Even customers who acknowledged the vendor's high price and low marketing skills had to admit the product practically sold itself.

One of my initial negotiating alternatives was to go with the vendor who would be most cost competitive and still meet our performance goals. But my best and final alternative prior to evaluations centered on high availability. With all of our critical applications running on this new storage, we simply could not afford lengthy or frequent outages. In this category the vendor with the arrogant attitude was head and shoulders above all the others. Total redundancy of components, remote diagnostics, and impressive proactive maintenance all combined to make their product the most reliable on the market. These features supporting high availability eventually won them the contract. The performance and reliability of the product exceeded even our high expectations, so much so that we procured more of the same two years later. While the company did improve their marketing skills and cost competitiveness over time, the incident confirms the value of determining your best alternatives prior to the negotiation.

Identifying Zones of Agreement

Identifying zones of agreement is a negotiating technique in which the two parties try to explore common interests and mutual values that help move the negotiation forward. These areas of commonality may not be a direct part of the negotiation but significant enough to encourage meaningful dialogues when talks bog down.

President Jimmy Carter used this technique very successfully in attempting to further negotiations between Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin. The common zone of agreement among all three parties was their deep belief in religion. Even though they practiced three very different faiths, they shared a mutual respect for each others' convictions. While there were numerous other factors involved, this common area of religious beliefs helped lead to the historic Camp David Accords in 1978 and the signing of a peace treaty with Israel in 1979. Though the signing eventually ended in tragedy when fundamentalist assassins gunned down President Sadat two years later, historians agree that the act of getting these two arch-rivals together to sit and negotiate is one of President Carter's greatest achievements.

A few years ago I began negotiating a contract with an IT disaster recovery service provider for a major client. Initially, the positions of the service provider and me seemed to have little in common. I preferred local testing on equipment identical to that of my client, with easy access for my technical staff. The vendor could not offer any of these. Their testing facility for this type of equipment was across the country; their models of computers would be upgraded levels from what we were running; and only limited personnel could be admitted.

In exploring these differences further, however, we realized that testing remotely would help us to simulate an actual disaster more realistically since some disasters would require a remote recovery. Running on upgraded equipment would likely enhance performance rather than degrade it. The vendor's technical support proved to be excellent and eliminated the need for several of my staff to travel to the remote recovery site. By searching for zones of agreement in our negotiations, we found we had more in common than not, leading to a worthwhile five-year contract. This technique of finding common areas and mutual interests can be a powerful tool to add to your negotiating arsenal.

This second of a two-part series on negotiating covered the three important aspects of positional bargaining, determining best alternatives, and identifying zones of possible agreement. The first part two explained two additional facets of barriers to agreements and how to build rapport. Whether used individually or in combination, these five elements of bargaining can help anyone negotiate more successfully.

References

Fisher, R., Getting To Yes: Negotiating Agreement Without Giving In, 2^nd Edition, Houghton Mifflin Company, 1992 (Based on the Harvard Negotiation Project)

Ertel, D and Fisher, R., Getting To Negotiate: The Getting to Yes Workbook, Houghton Mifflin Company, 1995

Gallway, T., The Inner Game of Work, Random House, 1999