You have a choice about your buyer behaviour that may well determine the quality of service you receive. Which would you like to be?
This is not about the amount of money your business spends, it is about how you go about your decision process at a strategic level. One of the worst clients I have seen for poor client value was a local government client who was spending hundreds of thousands of dollars a year. After I educated the client on the cost they had to industry they changed their buying behaviour. Let me explain.
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The council had a routine each year of replacing part of its PC fleet by putting the order out to tender. First they asked us, their regular supplier, for a quote to establish the base line machine they required and a ball park for the price. We got our quotes from the distributors and provided a quote with a 2% margin, to bring the total order in below the $100K tender requirement, so technically speaking the council simply needed three quotes.
It was many hours of work to prepare the quote and arrange competitive pricing with the vendor through the distributor, that was our first investment. We then received an invitation to tender for the same order. So we tendered, including travelling hundreds of kilometres to make use of a local tender deliver box. This added hundreds of dollars to the order. Several other businesses like ours also put in tender responses at a cost of some hundreds of dollars.
The outcome was that the council involved got a string of very competitively priced quotes and chose the local supplier to “support local industry”, while this was good for the local supplier, the council spent $99,000 of which the local supplier got to keep $2,000 or less, while the competitors who lost in the tender probably invested close to $5,000 between them. So the vendor in this case, HP, made $97,000 nice for them. While the SME competitors collectively lost $3,000 adding to the woes of the IT industry and ultimately putting up the costs for the rest of their clients.
Just as shoe shops have now started charging people to try on shoes with a “fitting fee” to fight the concept of try in store and buy online, the IT industry needs to find ways to work with clients in a more sensible way to remove the cost of quoting in a narrow margin industry.
In our MSP industry we work hard to become trusted advisors to our clients and many of us provide computer hardware as part of the service. Many of us work hard to provide fair pricing relative to our buying power only to have larger vendors undercut us by some small amount. When a client takes this opportunity to save a few dollars they are failing to value the relationship or the effort put into the advice, on what product to purchase. This is the most obvious poor client behaviour but there is another that is even worse and here the fault lies not only with the mindset of the client but some rests with the advisors.
Often we are asked to quote on a product, so diligently we provide a quote. We then ask for the order and instead get asked to quote a different product. This can go three or four rounds as the client gets closer to the decision. The cost of quoting will not be recovered in the sale as the margins are too tight. The fault here is that the client is trying to figure out what they want and mistakenly think the key buying decision is on price. Once they have the price they then look at feature benefits and fit for purpose. The better solution in this case is to ask for guidance on product selection, seeking advice on the right metrics for the decision. In this way the right product can be found first time and only one quote or proposal needs to be generated. In an industry that is providing technical services it can be hard to get staff to say, “No I won’t quote you for that until we have established that it is what you need”.
This is where ensuring strategic thinking is put at the start of the buying process. There are of course advantages on the client side as well as the vendor side of this equation. If the advice you receive helps you to gain confidence in the solution you will spend less time trying to gain an understanding from the feature set of the device or application. You will also get a better solution and a better return on investment.
IT decisions made based on the available features of the component purchased are a reactive approach to problem solving. Looking at the problem to be solved and selecting the best device will save a lot of time and ensure the money spent is working effectively to solve the critical problems that were worthy of solving.
Of course all of this starts with finding an advisor you can trust. Shopping on price alone is unlikely to get you this outcome. What kind of client will you be to your IT services provider?
David Markus is the founder of Combo – the IT services company that ensures IT is never an impediment to growth.