As you all know, the economic climate of 2009 is a cold, cold winter indeed. And like wolves starved by the cold and hardship of the season, our suppliers have turned feral.
When everyone’s sales slip due to the down economy, companies (and individual sales reps) are desperate to make their numbers. How are they doing it? By trying to jack up maintenance costs, in some cases by more than 100%! It’s way more than isolated incidents; all our maintenance renewals coming up are meeting with hugely inflated quotes. And not fly-by-night companies either, I don’t want to name names but let’s just say I am confident everyone out there has heard of all of them.
So protect yourself. In your dealings with your supplier reps, start making it clear way ahead of time that your economic situation sucks too and you certainly expect that there’s a price freeze in place. Don’t put up with it either – they know they’re going to make plenty of money off all the goons they send quotes to who will just rubber-stamp it and send it on so they can return to ESPNZone (I’m looking at you, State of Texas). If you put up enough resistance they’ll go looking for easier pickings, just like those mean ol’ wolves do. We had one outfit that wanted to jack up our maintenance cost by $125k a year, but luckily our IT director is a firm lady who has no problems with browbeating a sales rep until he cries. In the end, we let them have a 5% increase because we ended up feeling sorry for them.
And have a backup plan. If they really do have you over a barrel, then you’re low on leverage – you can try offering reference calls, presenting at conferences, and other handy non-cash incentives to them. But when it comes down to it, you need to be able to walk away from them. And to do this you need to plan ahead. There are very few things that there’s only one of. Have multiple suppliers lined up, and have a plan to change hardware or software if you have to. Also look into open source, or third party support – even if it’s “not as good,” these days you have to decide how much good is worth how much money.
Now don’t get me wrong, we like to partner with our suppliers and treat them friendly. Win-win and all that. But good fences build good neighbors, and there’s nothing friendly about showing up and saying “Hey, your operations will grind to a halt without our product, so stick ’em up and give me double this year!”
Be advised, that gleam in Bob the Sales Rep’s eyes will be a little hungrier than usual these days, and he’s gotta eat one of God’s little forest creatures to live. Just make sure it’s not you.
One response to “Beware The Wolf In Supplier’s Clothing”
As usual, I’m correct. Check out this InformationWeek article on Oracle’s record profits during this downturn – and it attributes it specifically to maintenance dollars. IBM Corp. blew away second-quarter profit projections and jacked up its full-year earnings forecast Thursday. Guess who tried to double our maintenance this year? Hope you’re all keeping your pimp hands strong out there. If you’re suffering, propose a maintenance reduction, don’t put up with increases.