When it comes to negotiating with vendors, hospital and health system CIOs are finding that the handshake is just the beginning.
For CIOs, the ability to successfully negotiate with vendors is critical; not only because of financial pressures, but because the negotiation process can set the tone for the relationship. According to the August healthsystemCIO.com Snap Survey, 78 percent of CIOs said they believe the impact of the negotiations can be felt long after the ink has dried — particularly if one or both parties feel they got the short end of the stick.
“You need to be careful in striking the right balance in negotiation,” one CIO noted, cautioning that a lopsided deal can backfire and become a “lose-lose” proposition. In the survey, nearly 3o percent of respondents expressed concern that driving down the price of a product or service could end up costing the organization in the long run.
“It needs to be a win-win for both sides in order to be a success,” another CIO said.
Although negotiating can be a minefield, most leaders are up to the challenge, and view it as a key aspect of vendor management. “I like to do it because then I am the one who has the relationship with the vendor and I am the one who will be calling with service concerns. I like them being able to link those two events directly,” one respondent noted.
For those lacking in experience, however, negotiating a major deal can be daunting. In the survey, half of respondents said they don’t believe sufficient educational resources exist to help leaders build this necessary skill. “I would say there are not enough educational resources but in most cases, it is more of an art than a science,” said one CIO. “You have to gather facts and leverage appropriately, but you also have to always be respectful and recognize the best conclusion is a win-win for both sides.”
(SnapSurveys are answered by the healthsystemCIO.com CIO Advisory Panel. To see a full-size version of all charts, click here. To go directly to a full-size version of any individual chart, click on that chart.)
1. Have you been directly involved in contract negotiations with one or more vendors?
- I am usually the primary negotiator with software, service and hardware vendors.
- I get very frustrated by the end-of-year or end-of-quarter negotiations, as my CFO says, ‘If they want our business they will honor this price down the road,’ and then is surprised if I cannot negotiate that deal.
- It’s a major accountability of the CIO.
- It’s a major part of my job, along with ongoing vendor relationships.
- Always a unique experience.
2. If so, were you been satisfied with the deal(s) that was reached?
- In most cases
- I still feel that software and services vendors charge more than they should. We get some concessions, but not enough.
- I am never completely satisfied. However, it’s important to recognize that it is better for both parties to be less than completely satisfied and have a solid relationship than for one to be completely happy and the other unhappy.
- It’s a monopoly for the EMR vendors and no one can afford to change, so they have you.
- It’s a toss-up on the first and second choice. I do factor in multiple objectives when reaching a decision, and at times when the reality of the balancing act becomes real, I wish I had paid more attention to specific line items.
No, not at all
3. How much of an impact does the negotiation process have on the ongoing relationship between IT leaders and the vendor?
- If either party feels taken advantage of, the ongoing relationship will be compromised.
- It sets the tone for the ongoing relationship.
- Needs to be a win-win for both sides in order to be a success.
Somewhat of an impact
- In some companies sales is very separate from ongoing support and the impact is much less.
No impact at all
- The negotiation process is to be expected and vendors and IT leaders understand that each one of us expects to get a fair and equitable deal.
- I would have preferred the choice “minimal impact,” but I think account executives know that this is business, and the company won’t sign a deal where they don’t see value.
- Once the negotiation is done, the relationship is built with other people. Hopefully the contract is put in a drawer and not needed until it’s time for renewal.
4. Are you (or have you ever been) concerned that negotiating a lower cost might affect the service you receive down the road?
- Yes, you have to recognize when it is starting to get lopsided and pull back.
- I think you need to be careful in striking the right balance in negotiation. Do not go for a win-lose deal. This increases the risk that the arrangement turns out later to be lose-lose. The vendor needs to win, too.
- Accountability to service outcomes and having a contract that makes that happen is the key.
- We check the financial stability of an organization and know how strong or not they are. We both know what we need to be successful.
- We can all rest assured the vendor is looking out for their own interests.
- I fully expect our vendors to know when the deal becomes untenable and to stop well short of that point.
- This is business and usually the vendor wants a good reference and, in my experience, doesn’t go to such a low cost that it isn’t good business.
5. Do you believe there are sufficient educational resources available to help CIOs build their negotiating skills?
- I believe there are. I also believe there are mentors willing to share their skills.
- The barrier isn’t education as much as the CIO’s ego that he is a good negotiator.
- The market offers numerous educational courses pertaining to negotiations. This is a must-have core competency for a CIO.
- No one really expects me to be the lone negotiator. Our contract people would actually prefer to do it, but I like to do it because then I am the one who has the relationship with the vendor and I am the one who will be calling with service concerns. I like them being able to link those two events directly.
- I am not certain; all of my negotiating skills came from my education and operations work, both of which were/are not IT specific.
- I would love to see more information on negotiating skills.
- I would say there are not enough educational resources but in most cases, it is more of an art than a science. You have to gather facts and leverage appropriately, but you also have to always be respectful and recognize the best conclusion is a win-win for both sides.