Negotiating with your hardware vendor 101

Squeezing the most out of technology budgets seems to be a running theme these days, but customers frequently give up leverage in negotiating hardware deals.

According to Gartner analyst Leslie Fiering most hardware negotiations go wrong early on. A customer's maximum leverage occurs when a company is assessing its needs--also known as the time it isn't even close to making a selection. Fiering was speaking at the Gartner Symposium ITxpo in Orlando.

Once those discussions with a vendor start leverage goes out the window. Why? The vendor knows whether it will win the business. By time you actually start buying servers or PCs your leverage is history.

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While Fiering's talk focused on hardware, I've heard of similar circumstances with software. Here's the common refrain: CEO, CFO and other C-level execs talk to vendor on a golf course. These folks talk "solutions," but the promises are never recorded. Once a decision is made the procurement folks are told to close the deal quickly. By then the vendor has all of the control since it knows the customer isn't likely to walk.

Among Fiering's tips:

• Beware of the pricing details. For instance, Fiering said Dell pricing isn't transparent. Prices on the Web change daily--sometimes hourly. Fiering said that Dell is implementing a list price approach. Dell will also give you cheaper prices but inflate fees for shipping and handling.
• Do the prepwork before you put out a request for proposal. A company should know what it needs, where it's needed and all the service level agreement details. In theory that should take 2 to 4 months--the longest part of the deal.
• Use the hardware cycle as a way to update your software. The PC refresh cycle should match what you plan to do with your operating systems.
• Detail service level agreements early on. The more specific the better. If a hardware vendor is installing PCs set a date, note the locations and detail penalties if those goals aren't met.
• Aggregate volume. The trend of late appears to favor going with one hardware vendor to get maximum pricing and better terms.
• Desktops can last four years easily. Laptops have a high failure right in the first year--roughly 15 percent. Bottom line: Replacement cycles will differ between desktops and laptops. North of 30 percent of laptops will fail in fourth year. Plan accordingly.
• Negotiate three year deals with hardware vendors and talk volume ahead of time. Fiering says it doesn't make sense to negotiate longer deals. "You need to put the vendor on notice that they don't own you," she says.
• Little things matter. If you're buying at the end of the quarter, can take delivery in a centralized location and can pay cash instead of credit you have more leverage. Even being a reference account can get you a deal.