IT Purchasing Math: 8 Ways that Confusion = Profit

There’s a simple equation to keep in mind if you’re not sure you’re getting a fair deal when making a major IT purchase:

Confusion = Profit

A related equation goes like this:

Rushed deals = Profit

This is directly related to FUD (Fear, Uncertainty, Doubt). The more a vendor can confuse you and make you believe numbers that may not be in your best interest or try to convince you that you really have to buy NOW, the greater the odds are that you’ll make a bad deal.

My best advice is that for a major IT purchase (several hundreds of thousands of dollars),  don’t buy it  if you don’t understand the deal. Wait until you understand exactly what they’re offering and at what price before you make your move.

This is true no matter how much pressure the vendor puts on you to sign. And insure the vendor is giving you the best price by getting competitive quotes. Nothing keep a vendor honest better than knowing there’s someone else who’s in position to take their business unless the vendor can really make it work.

I know it sounds simple but I’m surprised at how many people sign on the dotted line without doing all of their due diligence. And there are some vendors (not all, mind you, but some) who will let you sign on the dotted line while giving you confused numbers that overcharge you for no good reason. Here’s are eight real-life conversations I’ve had with vendors and some things you can counter with to make sure they’re not taking advantage of you.

1. I know a lot of people who do this kind of stuff.  I can easily set you up with someone who can [fill in your related service].  The vendor could be giving you a good deal, but the recommended secondary vendor is the one who’s making profit for the two of them. This is very common when going for leases, where the seller wants to set you up with a leasing company. Try to keep from getting sucked into the vendor’s network, and get your own quotes for related services. It’s like when a doctor recommends you to a colleague for different services. It doesn’t always work out for the best.
2. If you buy by the end of the month, we’ll toss in [fill in appropriate give-away}. Vendor wants to make its numbers and may not want you taking too much time to get competitive quotes or realize where they’re making excessive profit. Whatever they’re offering isn’t worth the extra profits they’ll make if you sign now. Ignore the trinket. Take your time and question what’s in the quote. Get a competitive bid, if you can. One example is when IBM offers you a Tip Letter when you’re making a hardware purchase.
3. This process can be really complicated but I’ll try to explain it to you. Talking down to you and hiding profit in things that “are over you head”. Smile and play dumb and ask them to try to explain anyway. Sometimes the vendor will reveal where they may over-charge in their explanation. Let them talk. But double- and triple-check whatever they put on paper.
4. I’d do it but a) I don’t know if IBM/Microsoft/Oracle is going to approve (blaming big partner companies is very popular); b) it’s against company policy and my hands are tied (doesn’t want to fight for you; they’d rather bring in a bigger gun to say no). Vendor is at the mercy of a greater power that you usually can’t talk to (funny how that works). Try to talk to the greater power anyway. Again, get a competitive quote. To be fair, some companies really cannot lower their prices and they charge a premium based on their name. I really hate doing business with those companies.
5. I’ve done business with this company for x number of years, and I’ve never had anyone question me about that before. Vendor feeling a little too secure in his long-term relationship and taking you for granted. Wants to play victim and change the subject. This is a danger sign and an opportunity. You may have gotten to them. Remember to scrutinize old, trusted vendors as much as you do new ones. Sometimes familiarity breeds contempt (or at least profit) and you may want to shake up or replace an old trusted vendor if they take you for granted and start overpricing. Also watch out for any champions the vendor has inside your company. A long-term relationship between the vendor and a key decider can sometimes insure a bad deal goes through.
6. Yes, but look at the wonderful deal/feature/price over here. Vendor changing subject again. Doesn’t want to talk about your objection.
7. I’ve written a lot of deals and trust me, this is the price for this type of project. Basically the vendor is saying “Never mind about that objection, sugar, just hand me the check.” Ask if you can look at some of the deals they’re talking about. Know the marketplace and get a competitive bid.
8. That new untested process will work for you, we did it at another customer just last month. You may be on the bleeding edge, and they’re not sure it works but they want to sell it. Can the vendor somehow prototype it and show you it works for you?

The biggest protection against getting ripped-off is to get a competitive price from one or two other vendors. If a vendor feels they have an open field, they may take the sale for granted, feeling they can charge as much as you can bear because no one can call them on it. Getting competitive quotes and letting the vendor know they’ve got competition is the single best thing you can do to get them to reduce their prices or change their offering in your direction.

Outside of that, question the quotes. If you see a number that’s off, question it. The only time you can get concessions is before the sale. Once the paperwork is signed, it’s hard to go back and get a better deal.

This post is sponsored by Hertvik Business Services.

If your company is looking for experienced tech writers who have worked in the industry to produce case studies, white papers, or other marketing materials, feel free to contact Joe Hertvik @ Hertvik Business Services for a consultation.

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