Introduction:
Doing the same things and expecting a different outcome is the definition of insanity, at least according to Albert Einstein. Engaging with suppliers in 2023 requires a different approach otherwise, you can expect price increases by 20% or more on your annual renewals.
The Rise of an Anti-Customer Profiteering:
Historically, technology suppliers would at least try to align with their customers for mutual long-term benefit. In 2023, at the very time that their customers are in desperate need of relief on costs, technology suppliers have departed from their long term aligned stance. Instead, suppliers are forcing substantial increases ‘in year’ and introducing new one-sided terms which will yield outsized increases on future renewals as well. Suppliers have decided that 2023 is the year to maximize their profits and disrupt any customer-led cost savings agenda. Clients should expect (and actively prepare for) this type of predatory behavior in advance of any supplier negotiations.
The Perils of Unilateral Supplier Negotiations:
One common pitfall for clients is engaging in single supplier negotiations without a viable alternative. This scenario plays directly into the hands of technology suppliers, granting them monopolistic pricing control and limiting the client's ability to drive favorable outcomes. It is essential for clients to recognize the importance of a robust negotiation strategy and the need to avoid being held hostage by their technology suppliers.
The Power of a BATNA:
To counteract the supplier profiteering position taken by technology suppliers, clients must arm themselves with a strong BATNA (Best Alternative to a Negotiated Agreement). By thoroughly assessing their options and identifying viable alternatives to the supplier at hand, clients can bolster their negotiating position, thereby increasing leverage. This empowers them to make informed decisions about walking away from unfavorable deals and seeking more advantageous partnerships. If there is no BATNA, suppliers will maximize their profits at your expense.
Defining Walk-Away Positions:
Suppliers are banking on their customers not being able to fight back against their price increases due to either complacency or supplier lock-in. Lock-in is a legitimate condition in the short term but in the long term anything can be changed. In many client organizations, there are overlapping solutions from multiple suppliers. Whether real in the short term or contemplated as a longer range option, this condition can enable a competitive situation. When this situation exists, it also can provide a path to create value with a preferred supplier and enable efficiency by eliminating a redundant supplier. Where a ready-made in-house BATNA doesn’t exist, clients are advised to actively structure a negotiation well in advance of any renewal so as to have a plausible path around lock-in. In negotiations, clarity is crucial. Client organizations must clearly define their walk-away positions, setting a threshold beyond which they will not compromise. By establishing these limits in advance and being prepared to walk away, clients can regain control over the negotiation process and avoid becoming trapped in unfavorable agreements that give suppliers undue control over pricing and terms.
Disrupting Supplier Attempts to Impose Their Wills:
To break free from the economic dominance of technology suppliers, client organizations must
Conclusion:
In this age of evolving technology and changing dynamics in supplier-client relationships, it is crucial for client organizations to adapt their negotiation strategies. By recognizing the anti-customer position adopted by technology suppliers and taking steps to counteract it, clients can regain control over their bargaining power. Through a strong BATNA, clearly defined walk-away positions, and disruptive negotiation tactics, client organizations can level the playing field and drive mutually beneficial outcomes. As we move further into 2023, let us embrace the power of strategic negotiation and ensure that client organizations are no longer at the mercy of technology suppliers seeking to impose their wills.
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