Guidelines for Successful Technology Acquisition
10 Rules to Ease (but not eliminate) the Pain of Technology Acquisition

by William S. Wyler

Almost every business today is dependant on technology products for business operations. While the value of technology is obvious, so is the potential risk. A Technology Acquisition Plan (TAP) will help to optimize the acquisition of technology products. Below are 10 basic guidelines to keep in mind when creating a TAP.

1. Use an acquisition team; a specialized technology consultant, specialized technology legal counsel, an internal IT manager (if available) and internal management. Too often, technology acquisitions are left solely to internal IT personnel or outside consultants. They know their products, but often don't know the law. This approach can cost thousands or millions of dollars in higher costs, minimal warranty protection and lost litigation. An effective acquisition team has four essential elements. 1) The technology consultant to help craft and define the nature of the acquisition and select the best vendors; 2) specialized technology legal counsel to guide the creation of the bid document and lead the negotiations with the selected vendors; 3) an internal IT manager who will understand the company needs better than anyone else and who will define the nature of the acquisition; 4) an internal management decision maker, with authority to approve or obtain approval of expenditures and provide oversight.
2. Take the time required to outline the acquisition. This may be both the most important and the least appreciated part of the process. Often management wants the acquisition to be handled by the IT staff. Management wants little to do with it. However, a concise and well drafted outline and definition of the acquisition is key to a successful acquisition process. No one can understand the “broad view” (the forest, rather than the trees) better than members of management. Neither the IT staff nor the consultants should be expected to understand the detailed nature of the acquisition.
3. Use a Request for Proposal (“RFP”). Use of an RFP is vital. While RFP's are common, their use in a technology acquisition takes on added importance. An RFP 1) lowers costs by emphasizing competition; 2) creates a bidding document in which the vendors bids are in a set format to allow bid comparisons; and 3) the vendors are forced to bid on the purchaser's needs, rather than offering what is in stock or what's hot. A technology RFP is not just a neutral bid document. It is the first stage of the negotiation process.
4. Use a Functional Description in the RFP. Most technical consultants and IT personnel will recommend a technical description. However, people speak a real world language. A functional description will state, in plain language, what the acquisition is intended to do, not how many gigabytes it must contain. With a functional RFP, the purchaser taps into vendor's knowledge, skill and imagination, forcing them to meet the functional description, rather than simply asking vendor to fill a shopping list.
5. Send the RFP to Many Vendors and then Narrow the Vendors. In order to obtain the greatest value from the RFP, send it to a broad group of potential vendors. The RFP is written to encourage vendors to propose well considered and imaginative solutions. The best ideas from different bids can then be included in a best and final bid request, from which the best bidders will emerge.
6. Negotiate with one bidder, while holding another in reserve. Once the "final bids" are received, the best and second best bidders should become the target of negotiations. There is are two purposes for keeping a second bidder in reserve. 1) By having a reserve bidder, pressure is kept on the first bidder to be flexible in its negotiations. If the "winning" bidder thinks it alone has been selected, negotiating leverage is gone. 2) The second bidder is available in event of a deadlock with the first bidder, which does happen.
7. Never Sign the Vendor's Standard Form Contract. The attorneys who drafted the vendor’s agreement were interested in minimizing vendor’s obligations and risks while maximizing the purchaser's obligations. Never agree to sign the vendor’s standard form contracts, even if the vendor indicates that they are non-negotiable. Always negotiate.
8. Make sales brochures and sales literature part of final contract. Always make sales materials, including brochures, specification sheets and sales literature part of the contract. Unfortunately, this literature, which often makes promises or sets specifications, does not normally become part of the contract, unless you require it.
9. Negotiate Technology Products first, then price. Vendors often want to deal with price issues first and then offer versions of the technology products, based on the price that has been negotiated. The end-user should take the opposite tack. If price has been negotiated first, the vendor will simply offer technology products that fit within the vendor’s price range. On the other hand, by negotiating the technology products required first, it is much more difficult for the vendor lower its bid prices by cutting the technology products.
10. Always Negotiate Maintenance and Support Agreements in Conjunction with the Primary Agreement. While negotiating the primary agreement with the vendor, the purchaser has leverage, because the vendor wants the business. Once the agreement has been signed that negotiating leverage is gone. Therefore, maintenance and support agreements should be negotiated at the same time. It should also be negotiated for an extended number of years. This will assure that the vendor, once the purchaser has purchased the system, cannot use drastically increased maintenance fees to make up for the low ball bid it may have given to get the contract in the first place.

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