Caveat Emptor! Sound Advice for IT Buyers

My colleague over at sister analysis firm Ovum, David Mitchell, has authored a rather useful piece of analysis into the sales tactics of the major IT vendors, and what end users should be doing to recognize and deal with them.

Of course in simple terms the vendors are trying to sell you as much IT kit as they possibly can for as much money as they can get out of you, but there are more subtle tricks and ploys worth being aware of.

“Two blues songs are among my favourites: the first is ‘Wonderful world’ by Sam Cooke, which he first performed in 1960; the second is ‘Crossroad blues’ by Robert Johnson, from the 1930s,” Mitchell writes. “In the second of these, Johnson describes the pact that a musician strikes with the devil, where the musician sells his soul in return for musical greatness. The software industry has echoes of both songs. The marketing messages of vendors all promise a wonderful world, while the behaviour of some sales teams seems diabolical.”

In the research, titled “Software Sales: ‘Wonderful World’ or ‘Crossroad Blues’”, Mitchell documents the most common industry sales practices, to help end-user organisations avoid the worst tactics, but also to help the senior sales management at the vendors themselves to counter the elements in their salesforce that damage their reputation.

He describes various vendor gambits used to try and make more money faster from their customers: the ‘puppy dog’; ‘gunmetal in the mouth’; ‘buy more, buy now’; ‘calling headquarters’ and more. He also offers some advice on how end users can understand and cope with the vendors’ increasingly sophisticated tricks and ploys.

But as well as specific advice on the gambits vendors use, he offers these four pieces of advice that he says apply to all of the common tactics:

· Software asset management.

Have an active software asset management policy that allows you to know precisely what software you have purchased, the usage rights that you have for that software, and the procedures that you have in place to ensure that your usage remains within your contracted and authorised limits. A customer without an active software asset management approach is placing themselves at heightened operational risk.

· Alternatives.

Have an alternative to everything that matters. If the software provided by a vendor has a mission-critical role then you should have an alternative. If the removal of the software has a major impact on customers, operational performance or product innovation, then it is simply prudent business practice to have a commercial alternative. A good rule of thumb is that you should have a replacement plan for any element which forms more than 15% of the IT opex, or more than 25% of the capital allocation in any year.

· Caveat emptor.

Software contracts are full of detailed terms and conditions that may appear irrelevant. This appearance is false. Every small detail in a software contract has a potential downstream impact, and the end-user community needs to be sure that they fully understand the implications of every contract term. There

is a tendency among some vendors to have commercial terms hidden in supporting documentation rather in the main contract. The devil genuinely is in the detail.

· Commission.

It is crucial to understand the personal motivations of the sales staff, and these are strongly related to their personal financial reward structure; that is, the basis of their commission payments. Any end-user organisation entering into a major software purchase should make themselves aware of the incentives that the key members of a sales team receive from their companies. Software sales staff tend to be motivated in a Pavlovian manner. The adage that ‘compensation drives behaviour’ is very relevant to the software industry and end users need to understand this.

You can find this and other Ovum reports here.

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