The two-word battle cry issued at this year’s IT Deal-Maker Summit was “Always Compete”. It sounds simple enough, but evidence suggests that competition is absent from most supplier engagements. At our recent virtual client forum, ClearEdge CEO Jack Garrahan revealed that a staggering 53% of managed services deals were not priced competitively. Price gaps – especially on renewals – of 20% to 30% were common. The gaps are similar for PC and server purchases, according to ClearEdge data.
“If customers can’t compete on seeming commodities like PCs and servers, how will they achieve fair pricing in their SaaS and Cloud deals?” Garrahan mused.
Culture of Competition
Garrahan said the persistent price variances are consistent across organizations for the same three reasons:
1. Deal makers struggle to start deals early enough to compete
2. They rely on an unclear deal process
3. The deals involve multiple siloed stakeholders with different priorities
To create a culture of competition, Garrahan urged deal makers to apply a sustained and high level of energy and leadership to drive alignment internally and implement a repeatable set of proven best practices with suppliers. They must work to change the way they and their stakeholders engage with suppliers and move the organization’s existing approach to a new competitive one, as illustrated below.
Garrahan warned that this shift in mentality from A to B will not happen by accident: individuals must commit to providing the energy and push for this change. Otherwise, the deal economics will remain the same -- which is just how the vendors like it.
“IT suppliers work diligently to keep alignment from happening in your organization,” Garrahan asserted. They systematically form relationships throughout your company, gather information, devise proposals for you, constantly work to expand their footprint, hike prices at every chance, and make sure there’s a high level of lock-in and certainty surrounding every renewal. The deals they propose lack transparency, attractive discounting, and any time to consider alternatives by design. The supplier’s sales process takes over any process the buyer may have and stifles competition. In short, they exact a steep price for your misalignment.
Deal leaders face a formidable task to disrupt this pattern, and with this in mind, Garrahan calls on clients to play early, and play as one team. “This plan is easy-to-remember, it’s simple, and it always works,” he contended.
Process of a Strategic Deal
Garrahan outlined the ClearEdge roadmap to strategic deal-making below. “We know the process works to capture leverage and drive better outcomes but it requires a sustained and concerted effort,” he cautioned. The better deal leaders do on these actions, the better they will be able to keep their team together and compete effectively.
The ClearEdge process starts with data gathering, and requires answering to the following questions:
- Have we explored/vetted other options?
- Have we examined past RFI/RFPs?
- Are we following the vendor or leading?
- What’s our replacement window of time?
- Do we understand what’s proprietary to this vendor and the potential switching costs?
- Do we know the exact volumes of what we need and by when?
The answers to these questions will provide deal leaders with the credibility needed to form a cohesive team and the data required to mitigate risk with the vendor.
Garrahan went on to describe the tools, data and action items developed by ClearEdge to guide IT professionals through the process and drive the “play early and play as one team” message across the organization. From our new Client Portal to our proven Early Warning System, to our blogs, webinars, and analyst insights, ClearEdge has amassed a war chest to better position deal makers at the negotiating table.