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They Can Get It for You Wholesale

(continued)

Chuck Redpath, CIO at The C.P. Hall Co., a specialty chemical manufacturer and distributor, is also an NPI client, and he sees other advantages to using such companies. "I was having a hard time finding alternative vendors for one technology," he says, "and NPI helped identify companies that I could compare with my current supplier. It saved me from having to research an area I wasn't that well versed in."

Winsett says that NPI focuses on price, not vendor selection, and has no relationship or affiliation with any IT vendors. "We concentrate on comparing a proposed price to what we know other companies are paying," he says. That knowledge comes from a variety of sources, including NPI's client base and internal research efforts that include an extensive network of industry contacts, Internet sources such as blogs, and other proprietary techniques. He adds that this research aspect is becoming a key part of the business, and that NPI may devote more effort to providing broad transparency into IT prices in an automated way rather than via individual consulting assignments. "We even considered pitching something to Google," he says.

For now, though, the arduous work of persuasion remains the priority. Not only must these firms smooth the waters with procurement, but often they have to assure clients that bringing in a third party won't sour the relationship with a vendor. After all, the consultant walks away after a few weeks, but the client and the vendor will be joined at the hip for years. But Redpath sees no cause for concern. "The vendors will still call to thank you for the business, and you can position your consultant as the heavy rather than play that part yourself."

Winsett doesn't regard his company as a heavy — in fact, he says NPI doesn't even refer to its service as "negotiation," since that term, in his view, "suggests rape, pillage, and plunder." And while both Dupzyk of SCS and Winsett allude to some hard times, both companies appear to be doing well. NPI recently celebrated its 100th client, and counts such companies as Marriott, Lands' End, and Atlas Van Lines among its clients. SCS is growing and may soon expand into telecom contract analysis, perhaps with a partner.

Real growth, these companies say, will come when a C-level executive starts asking hard questions about the way in which IT deals get done — and assures certain people that there's no shame in bringing in hired guns. "In a perfect world," says Dupzyk, "procurement staff would just want to save the shareholders money." But IT is not, as he would be the first to tell you, a perfect world.

Scott Leibs is a senior editor at CFO.


Heads I Win, Tails You Lose
A quick look at the buyer vs. seller dynamic.
Sellers' Advantages Buyers' Disadvantages
They don't provide market visibility on pricing data. Typical buying process entails spending 90 percent of time on product/service selection, leaving only 10 percent of time to be focused on pricing and terms.
They don't reveal full range of pricing flexibility. Can't keep up with ever-changing pricing and terms from manufacturers/resellers.
Published list prices often have little to do with actual selling prices. May make IT purchases in any given category only sporadically, while vendors in those categories have vast experience in cutting favorable deals.
Products are often complex and highly customized, resulting in highly variable pricing. High cost of switching from one vendor to another tends to lock in customers, making them feel they have few options.
Source: NPI

Reader CommentsDisplaying 3 of 4

  • john heiden

    Feb 25, 2006 9:08 AM ET

    Reducing Costs

    This article is right on the money. As part of Expense Reduction Analysts, I work with SMBs to help them reduce … more

  • Joel Dupzyk

    Feb 2, 2006 10:16 AM ET

    More Information

    We can help lower costs. For more information about Software Contract Solutions, Inc. please contact Joel Dupzyk at … more

  • Vinnie Mirchandani

    Feb 2, 2006 9:02 AM ET

    More on the topic

    Thank you for quoting me in the article. After I spoke to your journalist I wrote this blog linked below titled Putting … more

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