Effects of the Supplier Cartel

Author: Steven Zolman

In one case with our client, we were working with their business consultant, and the software supplier they recommended for an enterprise applications deal.  The software supplier recommended a value added reseller (VAR), and the client also needed a systems integrator.  It was also decided to host and manage the application, and two providers were needed for this.  Due to incomplete software in the core offering, the client also needed to buy some third party applications, and also hired a development company to write needed custom software.  Further, the client needed to purchase additional networking equipment, processing equipment, and storage equipment.  Finally, the client also  needed to revise its telecommunications agreements, including a new agreement for network management services.  In the end, this new application required 14 suppliers, all with common interests of separating our client from as much of their money as they could get.

So did all the suppliers want our client to do this deal?  Of course they did; there was not one voice advising the client not to automate.  The only way all their pre-sales investments would get monetized was if the client did the deal and bought their stuff.  Did all these suppliers want our client to buy the minimum configurations or the maximum configurations?  Of course they all wanted them to buy big.  Did they all want to give their best deal, or did they all want to pile on the cost once they knew the deal was going to happen?  Of course once they knew the client was committed to the deal, they wanted to get their piece of the pie.  This unofficial cartel of suppliers often posed as advisors, but acted much more like influencers that were driving our client to make big investments.

Most organizations face this supplier cartel on their own.  They often lack the market information regarding cost optimization, and largely as a result of this unofficial supplier cartel, all the advisement they are getting is encouraging them to do the deal, to do it now, to do it bigger, and to do it for more money.  We encourage everyone to consider adding a neutral advisor and client advocate who has the experience you want, the expertise you need, and the results you demand to help you manage the demand in a way that leads to significantly lower costs and risk.  At NET(net), we are committed to helping our clients get the maximum strategic value for the lowest cost, and help our clients find, get and keep that value in their technology investments, agreements, and relationships.

Across 1500 clients, and 15,000 field engagements, we have helped clients capture and retain over $100 billion of incremental value since 2002, averaging 33% savings in the process.  In most cases, significant opportunities for cost optimization exist on a unilateral basis through IT cost optimization industry leading practices.  In many cases, additional savings opportunities exist with cooperation from your technology supply chain, resulting in sometimes dramatic effects towards reducing your costs and adding value to your bottom line.

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About NET(net)
Celebrating 10 years, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get and keep more economic and strategic value. With over 1500 clients around the world in nearly all industries and geographies, and with the experience of over 15,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client captured value in excess of $100 billion since 2002.  Contact us today at info@netnetweb.com, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and relationships.

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