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Everybody wants a bargain. But when it comes to the complex world of IT products, finding a deal or even knowing what something should cost can be tricky. Sixty-two percent of IT buyers say the pricing structures used by enterprise network vendors are “usually confusing” or “very confusing,” a new Network World poll finds.
CTO Dave Leonard of Infocrossing, however, has figured it all out. With extensive experience as a buyer and seller, Leonard knows all the tricks for getting discounts from vendors.
There are basically three things that motivate a typical vendor, Leonard says. The first is obvious: the vendor want new sales. The second is less obvious: the vendor aims to displace competitors, and may even set aside “displacement funds” specifically to give discounts to customers who agree to get rid of a competitor’s product and replace it with the vendor’s. The third driver is the fear of losing ongoing revenue streams from maintenance and support costs.
Customers can use this knowledge to get better deals, even in noncompetitive markets. Salespeople want to close deals before the end of the quarter because they are under constant pressure to meet goals for each three-month period. In other words, make a sales representative sweat for a few extra weeks toward the end of a quarter and you might get a discount.
“Even if there’s not a competitive situation, using time against the vendor gives them the opportunity to sweeten the deal,” Leonard says.
Leonard pulled out all the stops recently when Infocrossing, an IT outsourcing provider based in New Jersey, embarked on a standardization initiative across five data centers. The project saved the company $14 million through consolidation of labor, software and other costs.
Infocrossing, which operates in 12 states, has quadrupled in size through three major acquisitions over the past four years. The company ended up with data centers running three different server management tools, from CA, IBM’s Tivoli division, and NetIQ.
Infocrossing decided to standardize on NetIQ after an evaluation of the products, but didn’t tell the three vendors that the decision had already been made. The first step was to build a business case showing each vendor how much it would cost internally to use their products.
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Comments (1)
RE: Vendor beware: this CTO knows - and will exploit - your weaknessesBy Dave Webb on September 6, 2007, 3:10 pmGreat article. Of course the vendors being parlayed vs. NetIQ are the old-line vendors that, by virtue of their "solution-pricing" policies, created the very opportunity...
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