Decoding fair pricing: Navigating the complex landscape of enterprise solutions and equipment

Photo:Collected

Enterprise solutions in major businesses form the core of various services and are often intricate in nature. They create an environment with a tech web of support structures that are not easy to replace at a whim as they incur hefty costs, humongous efforts, and time. With the growing acknowledgement of IT dependency, both buyers and tech suppliers are evolving to adapt to the market and the need to meet complicated requirements. 

Various challenges arise, creating uncertainty in the quest for fair pricing. It is often laden with the burden of decision-making by top business executives. Big rate cards, yet much bigger variations in prices by different brands and suppliers, make decision-making more challenging. The challenges, as we discuss, might appear common across organisations and industries. Still, the solutions, irrespective of ingenuity or innovations, depend heavily on the transparency and governance aspects of respective organisations to succeed.

Challenges

Limited references, variable pricing strategies, and absence of published rate charts: The scarcity of references and the absence of published rate charts create the first challenge. Unlike standardised commodities, the pricing for enterprise-level applications and hardware lacks a comprehensive guide, thrusting explorers into uncharted waters. Moreover, an added challenge lies in the deceptive nature of published rates, as differential discounting practices tailored for different customers often require negotiators to play hard cards to get to a better price.

Discrepancies between vanilla versions and end products in applications: When it comes to applications, things get even trickier. Often, a significant price gap between vanilla versions and end products adds complexity. A more uncertain rate card appears as substantial effort is injected during implementation by the OEM or a third-party system integrator. This challenges evaluators to discern genuine worth beyond surface features. In essence, the odyssey to determine the fair price for enterprise solutions and equipment is marked by these multifaceted challenges.

The apple and orange dilemma, subjectivity in specialised enterprise applications: The apple and orange dilemma is the confusion in grouping or classifying products when they have distinct differences in capabilities or strength yet comply with the minimum threshold. While hardware acquisitions can often be dissected based on predetermined parameters, the complexity deepens when dealing with industry-specific, specialised enterprise applications. 

The job of comparing these solutions extends beyond technical specifications, introducing a subjective dimension that defies easy evaluation. In the field of specialised applications, the evaluation process transforms into a process of subjective judgments during functional and technical assessments.

Few solutions

Addressing limited references and absence of published rate charts: To address this challenge, leveraging tools like competitive bidding or reverse auctioning among technically qualified bidders is effective. While not guaranteeing the perfect product for the best price, this establishes a bracket between the highest and lowest bidders, serving as a valuable reference point for fair valuation. Moreover, it forces them into a competition amongst themselves, which may often be difficult to reach in a single negotiation.

Tackling variable OEM pricing strategies: Utilise historical data, especially the last purchase price, as a valuable landmark. Calculate a raw unit of measurement, such as the price per core or gigabyte of storage, from past purchases. While it may not be entirely accurate, it will serve as a memory sketch when you tackle a new negotiation. Extrapolate this value to today's context and compare it against the offered prices. Challenge vendors with the highest technical and functional scores, ensuring a critical assessment of their pricing strategy.

Mitigating deceptive published rates and avoiding unresolved and open issues for post stages Employ competitive bidding or live to reverse auctioning strategies to disrupt and challenge differential discounting practices. Before the commercial bidding, ensure that the bidders have understood and are ready to offer an all-inclusive price during the commercial bid. Open issues in the post-purchasing phases might rather expose the buyer to a quite disadvantageous moment. 

Understanding OEM Discounting Practices and Time Management in Negotiations: Recognise structured discounting practices and be assertive, prompting sales account managers to seek higher discount authorisation. OEMs do not usually discount arbitrarily. They have different thresholds authorising different levels of discounts. The more assertive and adamant you are, the more your sales account manager will seek authorisation for a higher discount. 

Acknowledge time pressure and plan negotiations with a buffer, allowing ample time without the urgency to conclude a deal hastily. Pre-sales personnel often race against time to close a deal to secure a deal before a particular period closing, utilising the urgency to get desired discounts.

Leveraging vendor insecurities: Exploit vendor insecurities either by indicating the potential risk of choosing a different brand and thereby creating the fear of losing an existing account or by capitalising on the eagerness of other aggressive OEMs entering the field. Either of these two is likely to yield a much better price.

Preparation to outsmart counterparts:  Negotiators must be equipped with sufficient knowledge to understand product functions and their position in the company's technology architecture. Familiarise negotiators with user complaints and critiques from reputable sources for insightful negotiation strategies. A few hours of research on sites and blogs like Gartner, Forrester, and the International Data Corporation (IDC) might enable the negotiator to have some tricky points up their sleeves.

Last Words:

The pursuit of fair valuation unfolds as a continuous journey where knowledge, information, resilience, governance, and adeptness serve as guiding principles. These qualities ensure that enterprises triumph in the dynamic and disruptive realm of IT enterprise solutions and equipment and their acquisitions.

Sketch: TBS

Aminul Sarwar is a banker and a procurement Specialist with direct exposure to Supply Chain Management and Technology Procurement for the last one and a half decades.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.