Monday, 25 July 2011 00:54

Sourcing Negotiations -- When Do They Begin?

Written by  Kathryn Douglass
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Business1_chalk and charcoalNegotiations, some say, happen when you least expect it.  We say negotiation is not an event, but a process.  The negotiations process start the moment you engage with the Service Provider candidates. Each step of the outsourcing process brings a subtle, yet important aspect of negotiation into play.

To understand this better, let's relate it to something we understand a bit better.   

You walk into a dealership and say “I want to buy a car” [The Pre-Bid Announcement].  The salesman says “what kind of car are you looking for?” [The Pre-Bid Conference].  At this point, if you have done your homework, you are fully capable of describing your requirements precisely, “I need an all-terrain vehicle that gets 30 miles to the gallon, seats 6 adults comfortably and has room for a two dogs, and a ski rack”.  [The RFP].  You may even be able to identify the make and model you are seeking – “I want a Jeep Grand Cherokee Overland, with GPS, Sun/Sound option and leather seats [The RFQ].  You will quickly be shown the most expensive Jeep Grand Cherokee on the lot, and you will start discussing price from there.  

If you do not know what kind of car you want, you may say something like “I am looking for an affordable vehicle for my spouse to drive the kids to soccer practice – do you have anything that will work?” [The RFI]  If the salesman is good, he will start asking questions, such as "How many kids do you have?" , "Were do you live?" , " Will you drive on the highway or just in town?" and "How much would you like to spend?".  [The Q&A]   

If the salesman is really good, he will ask questions that lead you down the path of choosing the car he happens to have on the lot that day, or one he can get is hands on quickly.  He certainly will not say " I don't have what you are looking for, but go down the street to te Toyota dealership -- they should have exactly what you are looking for". He will then show you ihs top choice for a vehicle that meets your needs -- and one that happens to be on the lot today -- and will wax eloquent about the ways in which it meets your requirements. [The Proposal] .  You will spend a bit more time discussing the features and functions of the vehicle [The Orals]   and then the two of you will probably proceed to haggle over price and other options. [The Ts &Cs Negotiations] 

However, if he is busy and doesn't have much time for you, he may start showing you vehicles without asking questions, and you will end up looking at half a dozen vehicles or more, none of which meet your real needs.[The broad stroke sales pitch -- sometimes called a "dog and pony show"]

 You may not realize it, but you were negotiating the minute you walked in the door-- long before the salesman showed you anything.  He sized you up, got some basic information, and did his initial qualification of you.  He tried to determine if you are a real buy or just looking for something fun to do on a Saturday afternoon.  If you say things like "I really don't know what I want, but I'll know it when I see it..." or "I have been looking at buying a car for six months now, and I just can't find anything I like".. he is likely to have an emergency call form his boss that he must take right away, and you will end up on your own or with the newest freshman sales person.  Some time later, you will probably be on your way to the next dealership, having further confused yourself with a myriad of new options.[Yes, they can and will disqualify YOU--- called a Provider No-Bid]

On the other hand, if he finds out that you have done your homework and know what you need, in an hour or so you will probably be driving out of the dealership with a new car, at a price slightly above what you were initially prepared to pay, but considerably less than that old junker was costing you to keep on the road, 5% less than the dealership in the next town, with some really super, extra features you hadn’t originally thought you needed, and in a smashing new color that all the neighbors will be envious of.  [Everyone is happy]

The point here is that the minute you engage with the providers, you are negotiating.  Everything you say and do from the initial conversations with the service providers will affect the deal, the provider’s perception of the initiative, and will determine how they staff, pursue, and bid the deal.  The amount of preparation you do in advance [The Sourcing Strategy] will dramatically affect how long the Outsourcing Project will last and the relative amount of time you will spend in each phase.

Last modified on Friday, 24 February 2012 06:50

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