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How to make the most of an IT buyer's market

Cindy Waxer | June 10, 2014
After years of fighting tooth and nail with vendors for meager price discounts or modest service-level agreements, IT has seen the tables start to turn: Sweeping changes are reshaping the vendor landscape, shifting negotiating power from stingy service providers to savvy CIOs.

Forbes agrees. Just as the federal government has been slowly embracing a shared services strategy, he says, the healthcare industry is inching toward a similar model, where multiple hospitals, clinics and laboratories will agree to share the funding and resourcing of key IT services to cut costs and improve efficiency. "There's a lot of opportunity to save money and reinvest the subsequent savings back into healthcare if we only shared some of these IT services," says Forbes, adding that the vendors that are most likely to come out ahead are those that "recognize the market is shifting and respond by packaging their software."

Sharing the Legal Load

But greater collaboration, bundled IT services and high performance standards aren't the only changes in the IT landscape helping to create a buyer's market. Organizations are demanding that even legal issues be treated as shared responsibilities rather than matters to be hashed out by bloated legal departments. After all, says Cole, "if you just have two sets of legal teams talking, you'll reach an impasse very quickly."

Cole should know. In the first four months of this year alone, he's had to tackle questions of intellectual property with at least three different vendors. That's because, in these litigious times, it's becoming increasingly common for unwitting end users to wind up entangled in patent infringement suits. For example, a hotel chain that offers its guests free Wi-Fi might find itself involved in a patent suit simply because it relies on server technology that has come under legal fire.

However, whereas in the past vendors would simply scoff at the notion of shared liability, Cole says there's more willingness now to address issues such as intellectual property as a mutual business challenge rather than as a legal technicality.

"We need to have protection so now it's a negotiation to determine how much liability a vendor is willing to give up and how much risk am I willing to accept," says Cole. "It's become a business discussion, not a legal discussion. In fact, it's a very common conversation in the IT community today."

That's not to suggest, however, that vendors are simply rolling over and letting customers call all the shots. For example, Graff points out that Kansas City, Mo.-based Cerner is both a buyer and a provider of IT services and says that, no matter how profitable a project might seem, the company will "never sign a deal [as a provider] where we can't deliver on what we've written into the contract."

But that's not all. Cole says most organizations do recognize and respect a vendor's need to turn a profit. "Recently we negotiated a deal where it came down to both sides saying, 'Here's what I'm willing to give you in terms of profit and here's where I need to be in terms of expenses,'" he recalls. "That's a partnership where we shook hands. But had we dug in our heels and said, 'Here's all I'm going to give you,' we both would have left with a bad taste in our mouth."

After all, there's no telling when the pendulum will swing back to a seller's market. All the more reason, says Graff, for savvy CIOs to make sure "it's a win-win situation for both parties."

 

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