Retail surgery: Renegotiating contracts over IT operating costs

Paul Mason Consulting chief operating officer Huw Thomas says his business is talking to all of its retail customers at the moment about how to work with, and not against, their technology suppliers.

Firstly, retailers should not apologise for wanting to renegotiate a contract. Thomas says: “There is nothing wrong with renegotiation. It can be healthy for the retailer to inject something into the relationship.

A little dance can be done where both can come out OK – but it has to be about more than money.”

For instance, he says that if you agree to take less service, then suppliers should be prepared to reduce their prices. “If you can reduce the workload on a supplier then it can cut its costs,” he reasons.

This could mean spending a little more on spare IT equipment so you can allow a supplier to take longer when repairs or replacements are required. Or it could mean being prepared to accept lower levels of service around equipment or applications that are less critical.

Thomas’s main bugbear is retailers that are putting all IT purchases through procurement teams that understand little about what is required and are tasked with reducing costs without being prepared to make any concessions to the supplier to keep the relationship mutually beneficial. Thomas says: “You have to let the person who runs the relationship play a part in the contract negotiation, although you might have to involve finance or purchasing as well.”