It was a “bet the company” deal, so we spent hours putting together a strategic negotiation plan and a detailed request for proposal to develop our software.
Then we solicited bids from qualified firms. Five parties bid, and our negotiations began.
Around the same time, I was asked to consult on a negotiation involving a multimillion dollar annual software contract between a company and its longtime vendor.
Software negotiations like these — and technology-related negotiations in general — often present particular challenges.
It’s hard to imagine companies these days not involved in significant technology-related negotiations, if only for their online presence.
So what are these challenges, and how can those involved overcome them?
According to Massachusetts Institute of Technology professor Lawrence Susskind’s “What’s Special About Technology Negotiations?” in Harvard’s Negotiation Newsletter, technology negotiators face the following challenges:
A knowledge disadvantage.
I am the first to admit to a lack of expertise in the world of technology. Sure, I am addicted to e-mail and the latest technology tools to increase our efficiency and effectiveness.
But I — like many others sitting at the negotiation table — lack the software and hardware expertise to intelligently evaluate the strengths and weaknesses of most sophisticated technology issues.
The solution? One, educate yourself about the technology issues on the table. And if you don’t understand a technology-related comment or issue, ask. If you gloss over a technology issue without fully understanding and exploring its potential ramifications, you may head down a very counterproductive path.
Two, consider bringing in an expert to help evaluate the technology and risks involved.
In our “bet the company” deal, we hired an outside technology consultant to help put together the RFP and to help evaluate the bids.
Bottom line: Do all your due diligence so you can fully understand the basic strengths and weaknesses of the technology, the options on the table and the implementation challenges.
Technology often involves high risk and uncertainty.
Few can predict the true pace of technological change.
The fact is, many technology deals involve high stakes predictions as to whether the technology solution really will deliver on its promise.
In fact, even if it delivers, the “solution” may be many times the anticipated cost and may be quickly rendered obsolete.
Different sides in a negotiation also may have different opinions as to the risk, stability, predictability and uncertainty related to the technology.
As a result, incorporate some of these contingencies into the deal. For example, one challenge in my client’s contract negotiation with its vendor involved unexpected software changes it had required in the past.
Because the original agreement did not adequately address this contingency, these ongoing issues caused tension between the parties.
Beware of the potentially negative impact of egos.
It’s easy to get caught up in the latest and greatest and lose sight of the practical business goals you want to accomplish with technology.
We weren’t sure what technology platform might provide the most effective software solution when we sent out our RFP.
And we saw some exciting possible solutions tied to very different technology platforms with varying costs and met some brilliant technologists.
Frankly, a part of me, driven by ego, wanted to hire the most brilliant team and include the most cutting-edge features.
But we kept coming back to our goals. We needed simple and effective — not the coolest thing out there.
So, understand the technology, manage the risk and uncertainty and keep your business goals — not your ego — front and center next time you negotiate a technology-related deal.
Published May 5, 2006 The Business Journal