Forward Looking Strategy in Negotiation

Our client needed to purchase new data domain hardware ($2M value) and Savings Realized initiated a request for bid with three national IT hardware suppliers.  The most critical element to consider with this type of purchase is the accurate estimation of the disk space needed, especially because this would be a three-year deal.

When the bids were received, one company (Supplier A) seemed to be the obvious choice from a pricing and technical perspective, with another supplier (Supplier B) in close contention.  We allowed a best and final bid from both vendors.  Keep in mind, both suppliers performed its’ own review of our existing domains and completed data calculations for the capacity.  Supplier B submitted a final bid and surpassed Supplier A from a pricing standpoint with no reductions in capacity.  Our client’s technical team reviewed Supplier B’s bid and opted to have Savings Realized move forward with final negotiations.  

Although our client’s environment and total workload were reviewed and validated by Supplier B, Savings Realized wanted to proactively protect our client as capacity (usable vs. effective) may be viewed differently by both parties.  Also, our client provided a forecast of data capacity needed for the term. 

We requested that a future proof guarantee clause be incorporated into the contract.  This request was initially refused by the supplier; however, they were eager for the business.  Our argument was that the supplier had unfettered access to our client’s environment and technical resources to perform the capacity calculations – so why not stand behind their work?  We successfully negotiated the inclusion of the guarantee, which meant that if our client’s usable capacity outgrew the hardware at any time within the three-year period, the supplier would provide additional disk space and support, at no incremental cost, for the balance of the contract term.

Less than one year into the contract, the client was alerted to the fact that they were at 98% capacity on the new hardware.  After numerous meetings with the supplier and deep dives into their calculations, under the future performance guarantee in the contract, our client was provided additional disk space with support at no incremental fee.  Our client was very impressed at Savings Realized’s ability to look beyond the requirements of today and create a safety net for the future.

The expertise and experience of Savings Realized provided the forethought to insert the contractual language that protected our client from expensive added capacity purchases during the term of their existing agreement, mitigating financial and operational risk from their business.