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Being Unreasonable with Software Vendors

May 20, 2010
By

Jeff Vance






When I asked the LinkedIn community when it makes sense to be “unreasonable” with vendors, one of the first responses I received was from Wallace Jackson, Multimedia Producer at MindTaffy Design, a new media content production company. "When they are unreasonable in the first place. Otherwise, never," he said.

Many more responses came in with that basic sentiment. Striving for fair play was the consensus – but not overwhelmingly. One vendor rep even sent me a lengthy harangue about business customers daring me to post "a call for comments to vendors on the common unreasonable requirements that BUSINESSES place on them." He warned that I should expect a "deluge" of irate responses in my inbox.

Fair enough. Both sides of the table can be unreasonable when it comes to IT spending, but the question I'm seeking to answer in this article is when "unreasonableness" is actually a good negotiating strategy.


The Best Deal Often Isn’t

All too often, a hardware or software vendor will present you with its “absolute best deal,” one better than any other customers are getting. "With much fanfare, and only with a non-disclosure agreement, vendors often show potential clients only the contracts of other users who are paying more than the current proposal," said Jonathan Scott, a partner at Scott & Scott, LLP, a business and technology law firm. Instead of feeling like they've walked onto a used car lot, many customers simply believe the claim. As the adage goes, when it sounds too good to be true, it probably is.

What Scott recommends when you encounter too-good-to-be-true pricing is to challenge those claims. "One way to test the accuracy of statements made by the vendor in the selling process is to insist on appropriate most-favored nation (MFN) language. If the vendor balks, that is likely a sign that the 'deal of the century' statement is puffery," he said.

Is MFN language unreasonable? Vendors will often claim that it is, but when you’ve caught them in a lie, your position is strengthened.

The Power of Payments

After the contract has been signed and you’re well into the deal, what happens when your vendor doesn’t live up to all of the claims made to get you into the contract in the first place?

“When a vendor stops communicating with you or refuses to discuss issues with their lack of service, you only have one card left to play and that is to delay payment,” said Chuck Cornell, IT director of Business Solutions at Johnson Outdoors. “Per the contract, this may or may not be unreasonable but it gets the communication flowing again. The couple of times I've had to go to this step have also been the final signal to find alternative vendors.”

Withholding payment often means you’re violating the terms of the contract, and the vendor may respond with a lawsuit or a collections claim. If you take this step, it’s important to document all of the vendor’s failings ― the lack of service, the missed deadlines, the unreturned calls, etc.

Having a lengthy paper trail doesn’t mean you’ll win if the dispute actually goes to court, but it certainly improves your odds. Moreover, it betters the chance that the vendor will walk away from you, realizing that it’s not in their best interest to fight a losing battle.

When Unreasonable Is Anything But

Being unreasonable doesn't mean you have to play dirty. It can even mean being an advocate for your customers in a market where the customer is used to being treated poorly. The Fulcrum Group, an outsourced IT solutions provider based in Keller, TX., operates in a market space where communications monopolies tend to charge exorbitant fees for things like early termination. The Fulcrum Group negotiates terms that buck this trend. Fulcrum often absorbs many of the upfront costs for its clients, helping them to modernize so they can actually take advantage of the many technology services in Fulcrum's portfolio.

However, even with these early subsidies, Fulcrum shuns early termination fees; instead allowing customers to opt out early in the contract with little or no penalty. "Basically, we're betting on ourselves to execute the deal so well that the customer would have to be crazy to walk away," said David Johnson, principal at the Fulcrum Group. If nothing else, a strategy like this creates goodwill, and for a small-sized company like Fulcrum, these practices also encourage word-of-mouth referrals.

A book popular in management circles these days is Paul Lemberg's Be Unreasonable: The Unconventional Way to Extraordinary Business Results. As the title makes clear, the idea here is that being reasonable can be very productive. Being unreasonable garners you a certain amount of success, but being reasonable makes you predictable and ordinary. You won't break new ground and blaze new trails by being reasonable.

The line gets blurry, though. After all, some of the great "unreasonable" success stories, be it Howard Hughes or Steve Jobs, have been both unconventionally unreasonable and quite conventionally unreasonable.

How to Fight Back

According to Benjamin Wright, Legal Issues instructor at the SANS Institute, it’s a good idea to go into any negotiation with a few "unreasonable" tricks up your sleeve. For instance, the IT security landscape changes drastically from year to year. However, many companies haven't renegotiated terms with security software vendors for years. "What you can do when you realize your contract is out of date is send a 'unilateral letter'," Wright said.

The letter will say something like:

"Dear vendor,

Thank you for years of service, but our existing contract must be modified. A reasonable interpretation of our contract requires you to perform x, y and z to meet accepted security standards.

Signed,

Your Customer"

If the vendor doesn't respond, it could legally be interpreted as a tacit agreement. You haven't spent the time, effort and money to actually renegotiate the contract, but the result could end up being the same as if you had – even better in many cases. Similarly, there's a legal concept called "the battle of the forms".

"What this means is that at a business level you can say pretty much whatever you want to on your forms. You won't always win, but you won't be punished for being aggressive," Wright said.

For example, the next time you order something online, instead of simply checking the "I Accept These Terms" box, shoot off an email saying that you do not agree to those terms. Say that you are notifying them that you reject their terms and your own terms apply. Then click the box and buy the product.

"The courts don't know what to do with this," Wright said. "It's chaotic. Chances are it will never go to court, but even if it does, sending off counter terms will strengthen your hand."

In an ideal world, "unreasonable" strategies like these would never be needed. Obviously, free-market America is not a utopian negotiating world, where everyone plays fair and each party walks away with the best possible deal. Better to have some "unreasonable" strategies in your toolbox as you enter your next negotiation. Otherwise, chances are you won't be getting a very good deal.

Jeff Vance is a freelance writer and the founder of Sandstorm Media, a writing and marketing services firm focused on emerging technology trends. If you have ideas for future stories, contact him at jeff@sandstormmedia.net or visit Sandstorm Media.


Tags: Microsoft, Apple, software vendors, negotiating, unreasonable,
 

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