Negotiating contracts in technology can be challenging, especially if you are dealing with complex projects, multiple stakeholders, and fast-changing requirements. However, with some preparation, strategy, and communication skills, you can improve your chances of getting a fair and favorable deal. Here are some tips to help you negotiate better contracts in technology.
Before you enter any negotiation, you need to know your value proposition and how you can solve the problems of your potential client or partner. Research the market, the competition, and the expectations of your industry. Highlight your unique skills, experience, and achievements that make you stand out. Quantify your impact and benefits in terms of revenue, efficiency, quality, or innovation. Be confident and assertive, but not arrogant or unrealistic.
Unless it's your idea that is at the foundation of the agreement, your value is in your ability to do something for your customer or partner is looking to outsource. In order to quantify, or at least sufficiently qualify it, do the necessary research and prep work to be absolutely sure what that "something" is. Only then concentrate on how you can do it with higher cost efficiency than any other option.
When negotiating technology agreements, understand costs and limitations, tailor the agreement to your product/service, avoid overpromising, and include risk and liability limitations upfront to prevent disputes and litigation
Negotiating is not just about asking for what you want, but also about listening to what they want. Try to understand the needs, goals, and challenges of the other party. Ask open-ended questions, clarify assumptions, and confirm understanding. Show empathy and respect, and try to find common ground and mutual interests. Avoid making assumptions or judgments, and focus on the facts and the outcomes.
Having a good understanding of your company's needs is essential but understanding the fine details of each technology providers solutions and ability to meet those needs is critical. Too many times inexperienced buyers can be mislead by technology sales people that use buzz words or gloss over details with comments like...Sure, we can "integrate" with your critical business application only to be disappointed later when they learn it will require costly pro services to do so. If you are inexperienced with a certain new technology and all the supplier's marketing seems to sound the same, seek out experienced help from an independent technology advisor that has a track record of assisting customers with deploying these types of solutions.
In my opinion negotiating starts with understanding what your company needs vs what an individual team member may want. It is about aligning the internal team to Guiding Principles and ensuring everyone knows their role in negotiations. It is also about understanding the market and what the vendor needs to do the deal - do research, engage a technology advisor, dont make assumptions that just because you have negotiated a similar deal in the past the same rules apply to this negotiation.
One of the most common sources of conflict and confusion in technology contracts is the scope of work. To avoid misunderstandings and disputes, you need to define the scope clearly and explicitly. Specify what you will deliver, when, how, and with what resources. Include milestones, deliverables, acceptance criteria, and quality standards. Also, define what is out of scope, and how you will handle changes, risks, and contingencies. Use clear and precise language, and avoid vague or ambiguous terms.
The scope of a contract, particularly in technology, specifies the boundaries of the work to be done. It details services, goods, milestones, deliverables, timelines, quality standards, and resources involved. Clear scope definition helps avoid disputes, ensuring all parties have the same understanding. It's also critical to define what's outside the scope, how changes will be managed, and how risks and contingencies will be addressed. Vague or ambiguous terms should be avoided to prevent misinterpretations.
Define scope, then the assumptions that the scope was based on, then the roles/responsibilities of each party and use that to inform both the overall contract to be negotiated as well as the supporting statements of work. Include what data the supplier will have access to and ensure the contract addresses data considerations.
If the technology is already mature, it may be easier to clearly define scope, however, for evolving technologies, there is always room for uncertainty and change (potentially growth) in scope. Therefore, it may be prudent to keep some headroom for creativity, innovation and adjustment (obviously within limits and after getting buy-in of the other stakeholders) to allow for that and subsequently trigger management of change (MOC) protocol accordingly if anticipated scope change will be substantial
Once you have defined the scope, you can negotiate the terms of the contract, such as the price, payment schedule, timeline, warranty, liability, intellectual property, confidentiality, and termination. Be prepared to justify your offer and provide evidence of your value and performance. Be flexible and creative, and look for win-win solutions that satisfy both parties. Don't be afraid to ask for what you deserve, but also be willing to compromise and concede on some points. Don't accept the first offer, but don't push too hard either.
The ideal negotiation contains an underlying win-win framework. Win-win ideas can be found by analyzing each party's goals, cultural attributes of each organization, and thinking outside of the box. It's important to realize what drives your counterparty's success and failure. For example, a publicly traded company is prioritized around quarterly financials, reporting to the board of directors, and the brand image. Does the negotiation support those priorities? Successful negotiators consider the human element. Companies are comprised of employees, all of whom want to do good work, be recognized, and get promoted. Will the success of your proposal help the employees on the other side get promoted?
In my opinion, the price, payment schedule and timeline should be called out in the Statement of work/scope of work. These items can change over the term of a project and creating the mechanism for change needs to be reflected in the Contractual terms. I tend to view contracts as where we address what happens if things don't go well and statements of work as documenting what needs to happen for success to be a viable option. Each party must get what they need in order to stay engaged in the delivery of services.
Before you sign the contract, make sure you review it carefully and thoroughly. Check that it reflects what you agreed on, and that there are no errors, omissions, or inconsistencies. Look for any clauses that might limit your rights, expose you to risks, or create conflicts of interest. If you have any doubts or questions, ask for clarification or seek legal advice. Don't sign anything that you don't understand or agree with.
Don't be afraid to request editable versions, and redline agreements to reflect your requirements. Your counterparty will have the ability to do the same, and you can often finish negotiations after several rounds of ever shrinking redline portions.
Reviewing, redlining and negotiating a contract should happen while negotiating the terms - capturing what has been agreed to by the parties and reviewing it while continuing to negotiate will save time. Oftentimes, the parties will think they have reached agreement only to find the drafter of the agreement reflects things differently and or more subjectively than the other party thought they were agreeing to.
Negotiating a contract is not a one-time event, but an ongoing process that requires effective communication. Throughout the negotiation, you need to communicate clearly, respectfully, and professionally. Use positive and constructive language, and avoid emotional or aggressive tones. Express your interests and concerns, but also acknowledge and appreciate the other party's perspective. Keep the communication channels open, and update each other on the progress and status of the project. If any issues or disputes arise, address them promptly and collaboratively.
I agree that negotiations are an ongoing process and strongly suggest that the parties agree upfront on who speaks for the company. So often people will have sidebar discussions and think those discussions represent the final say. Make sure your internal team as well as vendor know who needs to be involved in a discussion in order for it to count.
Always look for the "definitions" section. If one doesn't exist - add it. At worst, you will give yourself ability to define a single word or a phrase for whole paragraphs, saving you a lot of writing work. At least, you still ensure that you and your counterparty are on the same page lowering the probability of a misunderstanding. At best, you can confirm that there are no nested definitions that might get you or your company in hot water.