Negotiation – How Do You Strategize?

It was gloomy afternoon in Silicon Valley of India, Bangalore with heavy rains outside. Gary’s mood was matching the gloomy weather and was aimlessly watching the rains from his office window.

Jnan couldn’t help notice that something was bothering Gary and walked in his office. ‘What’s wrong? asked Jnan. ‘You seem to be lost and look a bit stressed out.’

Gary and Jnan shared excellent working relationship. Jnan had spent 20+ years working in the industry and had played variety of roles, had gone through all kinds of difficult situations facing the business. Gary was young, enthusiastic and very smart individual who was in the ‘fast track’ when it comes to taking more responsibilities in the company. Gary had absolute trust on Jnan and high regard for his experience and advise which he had received from time-to-time.

‘Jnan, I have a very difficult customer negotiation situation and I am stuck as to how shall I proceed?’ replied Gary.

‘Is that so? Can you please explain what is going on? May be I can help you.’ Jnan asked in a tone, which was comforting for Gary.

Gary was dying to share and get this issue out of his system. ‘I have a customer who would like us to build their business critical application which two other vendors have failed doing. Their past experience has left them in a difficult situation but they have committed very aggressive timeline to their customers, which is impossible to change. There isn’t much flexibility with regard to scope of the project. They have very limited budget because they have spent or rather wasted millions of dollars with other vendors who have failed. They want fixed bid commercially but want us to be open to embrace any changes that comes during the project. To top it all, they want to insert all kinds of penalty clauses in the contract which could seriously jeopardize the very existence of our company.’ Gary said the whole thing without stopping to breathe.

‘Interesting.’ said Jnan. ‘Why do you want to do this project than?’

‘Good question Jnan.’ Gary continued, ‘this project, if done successfully will be an excellent case study for us. It is technically challenging for our people and this is bread & butter for the customer, which means it is “business critical application” for them. If we fail – they fail. The most important factor is that people are really smart and good at the customer end. It is just that they have burnt their fingers with other vendors and we have no choice but to take heat from that experience. Our people feel fairly confident that we can deliver and excited but I am not sure how to negotiate some sticky clauses from the contract in a way, which will address their concerns as well as will protect us.’

So, I assume you are interested to work with this customer. ‘Where is the customer or key decision makers located?’ asked Jnan.

‘Oh! They are in London and that is another logistics issue,’ Gary gasped.

Jnan thought for a minute and started responding ‘First of all, you need to take a flight tonight or tomorrow to go to London for a face to face meeting. No matter how strong relationship you share with the customer and irrespective of how we use latest communication channels like video conferencing, Skype or phone conferencing – there is nothing, which can replace face to face meeting especially for such occasion. Your presence for this meeting will re-iterate the fact that we are absolutely serious about this project, will re-assure that you will not shy away from difficult conversations if things don’t go as planned and most importantly, it will help built trust or nurture the relationship which may have been built. Just setup a meeting, book your tickets and show your face.’

Gary thought for a few seconds and said, ‘Yes, that makes a lot of sense. I will do that right away.’ He Continued, ‘however, how do I negotiate so that it is win-win?’

‘Absolutely. That is achievable as long as your intentions are clear and articulated which inspires confidence in your ability to deliver to their expectations.’ Jnan continued, ‘first and foremost, you should decide what is win-win, where would you draw the boundary beyond which taking risk will become suicidal for you and the company.’

‘Second, you should make it clear about what kind of engagement both of you is getting into. There cannot be confusion if this is time & material or fixed bid or capped and more importantly, how changes will be embraced along the journey. It would be fair to say that most businesses in today’s global economy are bound to change their vision, roadmap, ideas based on changing market conditions, competition and feedback that comes from the customers. You need to be clear how engagement model will embrace changes or make it difficult.’ Jnan was on a roll.

‘Third, be ready to give-in.’ Jnan said slowly but firmly.

‘What? Really?’ Asked Gary.

‘Yes, you heard it right. You need to give-in on certain things to win the big stumbling block that you want addressed your way. You need to be well prepared which out of 15 points in contention will you give-in after initial negotiation.’ Said Jnan. ‘Do you think you have them prepared?’

‘Yes. Now that I think of it, I believe so. There are many small issues with the contract clauses but we can live with them for now.’ Said Gary.

Jnan was getting all of his experience out on the table and continued, ‘forth, figure out how can you positively reinforce the boundaries for the big one, which customer isn’t ready to give-in but it is sticky issue for you. This could involve many things like scope, embracing the change, payment terms, product release schedule, clearing ambiguity of any kind (point of contact, decision making etc.) and much more. You need to make sure that you have understood main reasons, which are bothering them and are forcing them towards this sticky clause and address it accordingly.’

‘Hmmm…that makes lot of sense. In fact, we can live with sticky penalty clause if they are open to work out when penalty should kick-in, who and how the decisions will be made on the scope change and payment terms.’ Gary was feeling more confident now.

‘Excellent. If you focus on how you can carve out a win for you while letting them retain the penalty clause – you have created win-win situation right there.’ Jnan was delighted that Gary had thought through many of these things.

‘Fifth and final point, always maintain positive attitude. They need to know and hear it many times that you are in it for long-term game and not to make some quick bucks. You are thinking like a true partnership spirit and won’t run away like other vendors may have. Also, injecting the confidence why your company has the right skills to get the job done.’ Jnan completed putting his points across.

‘This is absolutely brilliant Jnan and thank you so much. I feel that I am better prepared now.’ Said Gary.

Gary started to take some notes as Jnan waked out of the office. It continued to rain through rest of the day but mood inside Gary’s office had changed completely.

After few days, Gary called Jnan to update that the contract has been signed and making a trip for 3 hour meeting to London was the best decision ever. Not only that the contract is signed but both parties feel that we have win-win situation, confidence is sky-high on both sides, intentions are clear, body language was very positive and we have clear path forward. I followed your advice and things worked out beautifully well. You are a life-saver Jnan.

Based on your brilliant piece of advise, here is what I have in front of me all the time now.

Mahesh Baxi is the CEO of Compassites. Mahesh has over 19 years of global IT services experience.Mahesh has spent most of his professional life in front of the customers and is very passionate about working with customers.Prior to joining Compassites,Mahesh served as the Managing Director for ThoughtWorks India.Prior to becoming MD, Mahesh served as Global Head of Delivery and COO at ThoughtWorks India. Before joining ThoughtWorks, Mahesh spent about 12 years in San Jose, where he held leadership roles in a number of startups that include Apttus, Vendavo, Nextance and Challenger Systems

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