Networking

Managing the vendor relationship: Buyers' leverage depends on product need

The economy and recent events, such as the Sept. 11 terrorist attacks, have prompted some vendors to discontinue once-prevalent discounts. Learn some unique ways CIOs can balance budget constraints with tech mandates when vendor cuts aren't an option.


The recent economic trials have left both winners and losers on both sides of the tech market, which makes one element of the CIO/vendor relationship even more important: leverage.

Lowered spending on IT has left some vendors desperate for business, but recent events, such as the Sept. 11 terrorist attacks, have propelled some distinct product markets into a boom phase. This isn’t great news for CIOs, however, who will have little luck getting better pricing, or more service, from vendors in these markets.

But although IT budgets are indeed tighter all over, some vertical industries, like government, finance, and health care, have not been as hard-pressed to save money. Thus, vendors will likely give CIOs in those areas less play when they ask for discounts, as vendors know that those CIOs can't play the budget restraints card as readily as can their counterparts in the manufacturing and education industries.

In this article, we'll discuss which vendor niches are hot right now, and we'll look at some ways CIOs can save money, even when vendor discounts aren't an option.

Much sought-after security solutions
The lessons learned from Sept. 11 are causing many companies to reexamine data backup plans and recovery plans, spurring a surge of interest in security and disaster recovery solutions overall, and shoring up some niche markets in that area as well.

For example, many companies are now looking into redundant data centers and products like multihoning switches, which allow connections to more than one Internet service provider, to protect themselves from the loss of data and communications that so many New York City businesses experienced after the terrorist attacks. The communications outage caused companies (and not just those in Manhattan) to reevaluate current connectivity. As a result, many companies are now looking for ways to connect to multiple ISPs—something they did not require in the past.

Missed the first or second parts of this series?
The first article, "Managing the vendor relationship: Tough economy means give-and-take," examined IT spending trends and ways to get more from a vendor. The second installment, "Managing the vendor relationship: Pricing static, but more support help is available," discussed how the relationship is trickier to manage for some more so than others, as the economy and hot-button issues like security have given certain services providers and manufacturers the upper hand.

This is spurring the demand for switches that can provide this level of access, according to some CIOs.

“We’ve had no trouble with ISP outages,” said William Perkins, director of IS at a Midwest insurance company. “But we’re going to begin using two ISPs in a few months just for redundancy."

Web-site content a hot issue
Although content management tools may not at first seem critical to security, they have also been gaining attention due to the events of Sept. 11.

Web content review is expanding, especially on sites related to all levels of government. Last October, the New York Office for Technology asked about 70 state agencies to review Web-site content and look for anything that might pose a risk of being used to advance an act of terrorism—including not-so-obvious items such as building-floor plans and the locations of wastewater treatment facilities.

“We’re talking about mundane content like building diagrams that were put up over the last few years as an aid to the public,” explained Ralph Shaffer, an IS manager with a Northeast utility company.

Creativity can supplant leverage
The increased interest in both these areas means that CIOs will likely enjoy less advantage in negotiations with security and content management vendors, and will need to find more creative approaches to meet budget mandates.

The economy has caused layoffs and budget cutbacks at many companies, many of which are now selling off unnecessary items, providing a good resource for CIOs looking to acquire new technology. One interesting source of budget relief that CIOs should consider is eBay, where IT gear, PCs, and servers are now becoming just as popular a product category as collectibles. In the last few months, many high-end IT items, including caching devices, routers, PCs, and servers, have been and continue to be auctioned off on a regular basis.

“We laid off about 50 employees in the last quarter of 2001, and we sold their PCs through auctions,” said Andrew Goldstone, CIO at a Pennsylvania medical supply company.

Bottom line
While some say that the economy is showing small signs of recovery, many experts don't believe the IT industry will see true relief for quite some time. And until the IT purse strings loosen, CIOs should seek out creative ways to finance necessary mandates beyond hitting up vendors for price cuts and service perks.

Editor's Picks

Free Newsletters, In your Inbox