Some technology vendors have hiked prices by up to 30 percent over the last year and claimed the rises are due to inflation, despite inflation running at a far, far lower rate.
So says analyst firm Gartner, in a document titled “How Should Executive Leaders Strategize Vendor Negotiations to Combat Inflation?”
The document offers two scenarios that author Jo Ann Rosenberger says are typical of tales told by Gartner clients in the last year.
In one, a SaaS vendor sends a contract renewal that includes an annual price increase of 21 percent, without explanation. “When questioned by the procurement team, the vendor sales team states that the increase is due to inflation and must be passed through to customers.”
Relay the message that pricing and cost play a key role in how you will view the vendor
In the other, an application maintenance service provider “sends an annual renewal statement of work with an 18 percent increase in the maintenance and support fees stating that the increase is due to labor shortages driving up internal staffing costs.”
If you receive such demands, Rosenberger’s advice is to make your vendor explain exactly why they’ve hiked prices.
“These vague and general answers can in no way serve as sufficient detail to explain or justify the fairness of these unexpected increases that result in hefty budget overruns,” she writes.
Another thing to consider is that demands for increased payments may be designed to encourage you into a snap decision. Rosenberger recommends instead slowing down the process to ask vendors for details about why prices have risen so far, so fast. If needed, wheel out execs to ask the same questions.
“The executive-level meetings serve as an opportunity to relay the message loud and clear that pricing and cost play a key role in how you will view the vendor relationship going forward,” the document states.
Arming yourself with actual economic data helps, Rosenberger argues, because it lets you make informed counteroffers. Information about inflation and wage trends is not hard to find buyers should obtain and digest it.
If all else fails, Rosenberger recommends waiting until the end of the quarter or financial year to do a deal. At those times, sales people need to put up their numbers. Quotes from alternative providers can’t hurt, either, while dangling multi-year deals can also move things along nicely. ®