Published on the 15/05/2025 | Written by Heather Wright

If you don’t ask, you don’t get…

Don’t be afraid to engage in a little – or a lot – of theatre when it comes to vendor negotiations, Luke Ellery urges.

The Sydney-based VP analyst in Gartner’s procurement, asset and vendor management team took attendees at this week’s Gartner IT Infrastructure, Operations and Cloud Strategies Conference on a whistlestop tour negotiation techniques, outlining 10 key tactics to gain an edge over vendors.

“Strong negotiators are great detectives.”

Ellery noted technology vendors are highly skilled at negotiation, and aren’t afraid to ‘really pile it on’ in order to get a deal signed – stories of vendors deploying war rooms, particularly for big deals, and even getting hostage negotiation training (‘I’d argue we’re the ones who are the hostage’, Ellery noted wrly) abounded.

But there are plenty of spots where organisations can hit back.

“We are going to retaliate and create leverage, using some skills and tactics and your team, to get the best outcome for your organisation,” Ellery said.

His first tip was to create a competitive environment – but to make sure your vendor knows its real.

Often if a vendor is coming to you or particularly if you’re already signed up to them and are looking for a new capability, will provide a price – take it or leave it.

“We definitely see this with renewals,” he said.

Case in point: Adobe, which the majority of attendees were using.

“They’re really hard to negotiate with,” Ellery says. “They will come in and say you’ve signed up to this enterprise agreement and now at renewal you’re going to have to pay 30 percent, 40 percent more.”

That’s can be even if your user base has gone down.

Ellery cites a government client who got fed up with Adobe’s increases which meant pricing – initially a great early discount – was akin to purchasing off the marketplace with no discounts.

They went to market with an RFP. Adobe, however, didn’t believe them and put in their usual offer.

“They only realised it was real when the deal was actually signed, and then they came back saying they could give all these discounts.”

Ellery noted the need to be clear that the competition is real, suggesting shared Q&A sessions where vendors see each other as one option.

Tip two was to ensure you ask for all the different pricing options, not just the one the vendor is pushing, and contract agreement types.

On the agreement side he noted moving between different models – such as Adobe’s enterprise agreements and VIP arrangements with volume incentive pricing – can be a good way to unlock some value, especially when reducing licenses.

“The key thing with all of this is to just ask. If you don’t ask, you don’t get.”

Ellery then took a turn into an area that could prove more challenging for some: Asking the vendor sales team how they’re incentivised.

It’s something about five percent of attendees said they’d done. That insight on how they’re compensated, what and when incentives and bonuses are and whether specific products/services or types of contracts provide better bonuses or commission, can enable you to work with the sales team to get a better deal which benefits both parties.

“Strong negotiators are great detectives. The vendors spend a lot of time researching you. They’ll ask all sorts of uncomfortable questions like what your budget is, who the decision maker is, sometimes they’re quite forward.

“Well, you can use those same detective skills to ask about how they incentivise and how you can work together to get a better deal.”

Carrying on the detective work, Ellery recommended monitoring vendors financial results, tracking fiscal year-end dates and timing negotiations to align with key dates, and using vendor websites to monitor key vendor information and changes.

Monitoring financials is particularly important now, he said, with shareholders looking for ‘crazy’ returns and a challenging economic environment.

He used the example of Oracle, whose 2024 second quarter financials showed declines in cloud premise and on-premise license revenue, along with hardware declines.

“This is a great opportunity. If you are monitoring this and you have got a renewal or new purchase coming up, maybe you can say ‘if we renew early or sign now are we able to get a better discount because we noticed that you’re not doing so well on the financials’.

“That goes straight to what is important for the corporation: Their shareholder value. We’re saying we can maybe help you out if you give us something in return.”

Around 10 percent of the audience are already tracking vendor year-end dates – something Ellery dubbed ‘really powerful’ as they’re a time when vendors – and their sales executives – are most keen to get some quick wins.

“If you know they are coming up to end of year and you’re ready to execute, you have everything in alignment, the pen poised over the paper, it gives you so much power, because that sales executive and their team are saying ‘I’m going to be able to make this sale as long as I hit what they’re after’.”

He urged organisations to look at having their contracts finish around three months after end of financial year for the vendor – removing renegotiations from a busy part of the year, but more importantly opening the door for future negotiation leverage in offering to do an early renewal to pull back into the financial year, something sure to have vendors salivating at the prospect of booking more revenue.

Meanwhile, keeping an eye on vendor websites, particularly the investor relations area of publicly listed vendors where they brag about the money they’re making from customers – can provide a gold mine of information to be used in negotiations.

“It tells how much gross margin they are making off the products and services they’re selling you, and it also tells you what the CEO has made strategic bets on. That’s gold. Because the CEO will need to demonstrate that strategic bet was successful and resulted in you buying that stuff they said was so important. And that gives you leverage.”

Adobe, as an example, is offering deeper discounts if you sign up to AdobeSign, or displace DocuSign.

Another tip Ellery offered up was to harness financial models and policies as leverage tools.

He noted how common it is for vendors to package everything up in a ‘magic number’ rather than breaking out line items. Having your CFO require line item details to determine if it is capex or opex can provide leverage to get the information.

Use TCA and TCO to reveal hidden or missing costs, and have should-cost models to use as counteroffers and work with the finance team to ensure prepay discount rates take into account net present value.

“Ensure vendors know that IT finance analysis is a required step in your proposal review process and a requirement for final approval.”

Ellery also highlighted an area of new risk which Gartner has termed renewal risk: That risk that the vendor is going to take advantage at renewal to sting you with massive increases (à la VMware/Broadcom – which Ellery says Gartner is ‘very nervous’ will rub off on other vendors).

Gartner recommends planning associated with renewals starts 18 months in advance and sending a letter to the vendor – not the account executive but the account team listed in the notifications area of a contract – addressing what the price is going to be for renewal, any changes to the products, and noting your organisations requirements for any additional obligations, such as around operational resilience and cybersecurity.

“The reason it goes [above the account executive] is you want that mechanism at the top to unlock leverage for your account executive to renegotiate a good deal.”

And the reason you go early? So you can start creating competitive tension if you’re not happy with their response.

“Finally, you need to build a negotiation strategy. You might not have a war room – though if it is a big deal you probably should – but you should plan out all the different components that contribute to you getting a successful outcome.”

As a final story about theatrics, Ellery recounted how one company negotiating for a new ERP solution they had fallen in love with was having issues with the vendor not agreeing to three key aspects in the contract – all walk away positions for the client.

In a staged meeting, the CFO, who was the decision maker, ultimately walked out on the vendor when they continued their sales pitch – as expected – rather than addressing the real issues. The vendor was escorted from the premises.

Three days later the vendor conceded on all points.

“That’s an example of a story where you need to convince a vendor that they are going to lose the business, that you will walk away and in the face of arrogance you demonstrate something where dramatically they realise they are going to lose the deal.”