Case Study: Cloud Infrastructure (IaaS/PaaS) Using Framing

Quick answer

Framing in negotiation can significantly shift the perception of value and costs in cloud infrastructure deals. By strategically presenting options, negotiators can create more favorable outcomes. This case study illustrates how framing tactics can be applied in an IaaS/PaaS procurement scenario.

Understanding Framing in Negotiation

Framing refers to the way information is presented in a negotiation. By emphasizing certain aspects and downplaying others, negotiators can influence perceptions and decisions. In the context of cloud infrastructure procurement, effective framing can turn a potentially contentious negotiation into a collaborative discussion.

Case Scenario: Negotiating Cloud Infrastructure Costs

Context:
A medium-sized e-commerce company is negotiating a cloud infrastructure deal with a major provider for IaaS and PaaS services. Their current cloud provider has raised prices, and the company is looking to negotiate a new contract that includes committed spend discounts and reduced egress fees while maintaining robust SLAs.

Initial Proposal from the Provider:

• Monthly Fee: $15,000
• Egress Fees: $0.12 per GB
• SLA Uptime: 99.9%
• Contract Duration: 12 months
• Committed Spend Discount: 10% off annual spend for a commitment of $180,000

Negotiation Goals:

• Reduce egress fees to $0.08 per GB
• Increase the committed spend discount to 15% for a commitment of $200,000
• Ensure SLA uptime is maintained at 99.9%

Applying Framing Tactics

During negotiations, the procurement team decides to use several framing tactics to achieve their goals:

1. Positive Framing: Instead of simply arguing against the egress fees, the team frames their argument around the value of increased data usage as a sign of growth. They present data showing that an increase in egress fees could stifle their growth potential, thereby making the provider's service less valuable in the long run.
2. Anchoring: The procurement team starts by presenting a lower initial offer, suggesting a monthly fee of $12,000. This anchors the negotiation to a lower price point, making subsequent discussions around $15,000 seem more palatable.
3. Multiple Equivalent Offers: They present multiple options to the provider:
   • Option A: $200,000 commitment with a 15% discount and egress fees of $0.08 per GB
   • Option B: $180,000 commitment with a 12% discount and egress fees of $0.10 per GB
   • Option C: $160,000 commitment with a 10% discount and egress fees of $0.12 per GB

By framing the offer this way, the procurement team makes it easy for the provider to see value in the higher commitment, while still keeping the other options on the table.

Outcome of the Negotiation

After employing these framing tactics, the final agreement reached is:

• Monthly Fee: $14,000
• Egress Fees: $0.09 per GB
• SLA Uptime: 99.9%
• Contract Duration: 12 months
• Committed Spend Discount: 15% off annual spend for a commitment of $200,000

This outcome not only meets the procurement team's goals but also maintains a positive relationship with the cloud provider, setting the stage for future negotiations.

Actionable Checklist for Using Framing in Cloud Infrastructure Negotiations

1. Identify Key Value Points:
   • Determine what aspects of the deal are most important to your organization (e.g., cost, SLA, flexibility).
2. Develop Multiple Scenarios:
   • Create different proposals that highlight various benefits and trade-offs.
3. Use Positive Language:
   • Frame your offers in a way that emphasizes growth, partnership, and future potential.
4. Practice Reframing:
   • Prepare responses to counterarguments by reframing concerns into opportunities.
5. Seek Feedback:
   • After initial proposals, ask for feedback to adjust your framing in real-time.

AI Prompts to Practice

• What are the key value points we should emphasize in our negotiation?
• How can we reframe a potential objection into a discussion about opportunities?
• What multiple equivalent offers can we present to create a win-win situation?

Conclusion

By understanding and applying framing techniques in cloud infrastructure negotiations, procurement teams can significantly enhance their bargaining power. Utilizing positive framing, anchoring, and multiple equivalent offers can lead to more favorable terms and stronger relationships with cloud providers.

For further assistance, consider exploring our AI negotiation co-pilot to enhance your negotiation strategies.

Further reading

• UK govt office admits ability to negotiate billions in cloud spending curbed by vendor lock-in
• UK government urged to align cloud spending as costs soar
• NSW govt looks to broker new cloud deals

FAQ

1. What is framing in negotiation?
Framing is the technique of presenting information in a way that influences perceptions and decisions in a negotiation.

2. How can I use framing effectively in cloud contract negotiations?
Focus on highlighting the value of your proposals and the potential growth opportunities while addressing concerns as opportunities for collaboration.

3. What are committed spend discounts?
Committed spend discounts are price reductions offered by cloud providers in exchange for a commitment to spend a specific amount over a defined period.

4. How can I prepare for a negotiation in cloud infrastructure procurement?
Gather data on market benchmarks, understand your needs, and develop multiple equivalent offers to provide options during negotiations.

5. Why is SLA important in cloud negotiations?
SLAs (Service Level Agreements) ensure that the cloud service provider meets expected performance levels, which is critical for business continuity and reliability.

Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice.

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