The Art of Negotiation

Kathryn Mackenzie, for HealthLeaders Magazine , December 11, 2008
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Your vendor is playing hardball. Your budget is limited. You must have this new technology. Can you still get the deal you really want? Yes.

Tedious, time-consuming, and frustrating. For many chief information officers, those terms describe the process of negotiating a contract with a vendor. But that process is also one of the most important tasks a CIO performs. Depending on the size of the organization, vendor negotiations can run into the multimillions of dollars. As budgets grow ever tighter amid a difficult financial climate, getting the most products and services for the least amount of money isn't just a challenge for CIOs—it's a job requirement. But some common-sense strategies can help your organization come out on top of even the most intense negotiations.

Clarity is key
Before Diane Carr, deputy executive director of operations at New York's North Bronx Healthcare Network, gets into negotiations with vendors at the network's two hospitals, she already has a clear picture of what services she expects to receive in what amount of time. "I always keep in mind that vendors are in the business to make money, so I know that part of my job is to be very clear with them about what I expect, when I expect it, and how I expect it to be delivered," she says.

While that may sound like a fairly obvious strategy, it's surprising, she says, how often even experienced IT directors will purchase new software they never even considered needing because they haven't taken the time to sit down and lay out their organization's technological goals. Knowing what you are attempting to achieve from the new software or hardware you are licensing or purchasing can make all the difference in when it comes to the bottom line. By communicating those goals to the vendor in concise language, IT leaders can make sure that what vendors are selling is actually something the organization needs.

"They may be selling a product they are extremely excited about, and they want to get you on their customer base. You have to be very cautious how that is accomplished. By clearly outlining your goals, you can make sure their product is something that is really going to advance your organizations services and what you provide to clinicians and patients," she says. It's a lot like straying from your shopping list at the grocery store—only instead of overspending by a few dollars, you can end up losing millions in unused software and licensing fees.

Say no to boilerplate language
In the interest of time, many vendors use the same boilerplate language in each contract. While tailoring a contract to a hospital's specific needs may seem like a daunting task, Mac McClurkan, vice president and CIO at HealthEast Care System in St. Paul, MN, says it's absolutely vital. "You have to incorporate into the deal very specific language dealing with how the product is going to be installed or implemented. It's time-consuming, and the vendor may not want to do it because it's not part of the normal process, but unless you have an understanding of what the vendor and the client must each provide, it is not possible to negotiate an agreement that serves both parties' interests," he says.

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