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Written by Mark Jewell
 Successful contract and vendor management cuts costs, improves business performance and enhances vendor-client relationships. It wins the respect of others inside and outside your organisation and improves your professional standing. In short, it helps you do a better job. The skills apply to individual purchases as well as your largest information contracts and can also be applied to other areas of your professional and personal life. Use them next time you negotiate an employment contract - I recognise candidates who do and it often costs us money.
Over two articles I am going to look the four components of success: preparation, negotiation, contracts and vendor management.
Preparation is an essential prerequisite to effective negotiation. Negotiation is a fundamental part of business and something we frequently do in our personal lives. Without the basic skills we are going to cover, you risk being out-manoeuvred, overcharged or simply not getting the best deal.
A contract is a consequence of successful negotiation but, after the excitement of reaching a deal, the small print often gets overlooked. You need to know what to look for; it's not exciting, but it's better than finding yourself stuck with an automatic renewal clause or a hefty price increase.
Vendor management is the fourth component - setting expectations, preparing for the next renewal and building a constructive relationship. Both parties want an agreement which supplies the services you need at an acceptable price for the vendor and, if you are both serious and realistic, you ought to be able to agree a deal. Vendor management is not about getting one over the vendor, boosting your ego at their expense or winning or losing. It's not a zero sum game.
Preparation
So why take trouble over preparation? The vendor will have researched you and your company, talked to colleagues and peers and will try to establish the size of the opportunity and the best approach for a sale. You will need to be able to respond. You can't negotiate without similar information to support your position.
Give yourself plenty of time. You should know when a renewal is due and be ready when the call comes to fix a meeting. Being well prepared will boost your confidence, you'll feel in control, negotiate better because you feel better and gain a psychological advantage. Here are five of the areas you should think about.
- Know your market. Information professionals must be aware of new products, ownership changes, or enhancements that might affect contracts or service mix. You should know which products and services are worth looking at; you will be attending professional meetings and industry events and using them to gather intelligence. You'll be talking to your peers and friends in the industry, as well as your customers.
- Know what's important to you. Is it price, data quality, depth of coverage, timeliness or something else, and which is most important? Do your clients agree? Make sure you ask them. What can you afford, and what is the value of a product to you? If it's not a core product for you then its value may be much less, e.g. different parts of banks have a different view about the value of real-time news. Investment bankers value it less than traders, the core market, but it can be useful and that can be a tough position to sell to the vendor. Value can be tricky to establish but breaking down total expense to cost per access, per user, unit of data downloaded or similar can give a better sense of the real cost
- Know what you want to buy. Do you want to buy Factiva or Nexis? Possibly neither, you want access to company and industry news, and those vendors may or may not be the right ones. Think about what you need then think about products that might do that for you. It might not be the obvious ones.
- Know your vendor. What drives them? Some are very sales-orientated; others want to develop long term relationships. Company cultures may drive objectives and methods and should affect how you should negotiate. You might want performance guarantees from a sales-driven organisation that you might not need from a partnership-driven firm. Do your due diligence. Talk to your peers about them - vendors talk about you, after all. See if your experience is common - we've all had a vendor tell us that none of its other clients are reporting the same problem only to find they all do when you check with your peers.
Be aware of mergers, they can affect contract terms, management change may affect product development and declining profits lead to a squeeze on overheads costs such as help desks. Run the news searches, review financials, not just the most recent but trends over several years. Are they making more or less money? A few years ago we thought our major subscription agent was beginning to look a bit risky, there was suddenly more news and we were not comfortable with the new strategy. Further research showed deteriorating financials so we decided to move the bulk of our business elsewhere. The following year the company went bust. The additional work was unwelcome but nothing compared to the disruption we would have experienced, had we not been alert.
- Know your company. Look for synergies - who else in the company uses the same vendor? How much does your firm spend overall on them, can you get a better discount on an aggregated spend basis and have you already agreed master contract terms? Does another division have an alternative product you could share instead of buying additional services?
Structuring and organising your review
The preparation for reviewing a vendor's service will be easier if you structure and organise the information. The two basic tools commonly used to do this are a request for proposal (RFP), and a product comparison and analysis template.
An RFP sets out what you want to achieve. It's useful for complex products or services where there are a number of potential vendors or where some development may be required. It describes what you want and the process of writing it can be useful in clarifying your thoughts about what is essential and what is nice to have. An RFP helps the vendor to judge whether they can provide what you need, and levels the playing field - each has the same information about your requirements. If you need to know more, read the entry in Wikipedia and use its links to sites that explain in detail how to craft one.
Finding time to compare products can be difficult. Testing them requires more than using them on existing projects. You need to be systematic, compare each service equally and document your findings for use after the trial has ended. This is important if different people are looking at different products or sections. Create a template covering issues such as content, format, functionality, support/help, updates, price, speed and all the factors you think are useful to you, and work through it. That means you don't have to do it all at once; several people can participate and, like an RFP, you get a consistent 'apples to apples' approach. The FUMSI report on product evaluation covers this in much more detail and is a worthwhile investment.
This seems like a lot of work but much of it should be done routinely as part of your job, and a consequence of having the right processes in place to manage your business effectively. In my next article, I'll look at how the preparation helps with negotiation, contracts and vendor management.
About the author:
Mark Jewell is currently Director, Global Offshoring within Lehman Brothers Corporate Services Division. He was previously director of Business Information Services and responsible for the creation and management of the firm's non-real time data programme.
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