Johannesburg, 11 Jun 2003
Following the halcyon years experienced in certain sectors of the IT industry over the past few years, IT vendors and integrators are trying hard to re-invent themselves in an effort to ingratiate themselves with end-users who are now a lot wiser and less vulnerable to wise talk and hollow promises.
IT executives at end-user companies are now battle-scarred and are tired of hearing vendors talk about "long-term partnerships" and "total solutions", only to be left with major technological promises as the vendor disappears with the money. This is perhaps a bit harsh, but in many instances, this is the kind of calling card IT vendors and integrators have, unfortunately, been leaving.
Too often vendors have promised to install a workable system, claiming they will partner with the client until all the teething problems are adequately resolved. Because of distrust - caused by too many bad experiences - end-users are looking for vendors to rather share in the risks and the rewards. By revisiting the entire modus operandi and rethinking pricing structures, vendors become true partners and, at the end of the day, it is likely that the end-user and the vendor will emerge as winners. That`s because both sides have vested interests.
End-users are looking at value and return on investment. But, in all fairness, end-users are not suddenly being too demanding and greedy. This emerging trend shows that vendors will be compensated based on the value the application or service delivers to the client.
As this rewards-based trend gathers steam, an increasing number of vendors are changing their attitudes and, when pitching for a deal, ensure that they focus on return on investment (ROI) and risk sharing. Of course, they also try and build in a rewards structure for themselves.
This means that the vendor is now vulnerable. If the end-user wants to reach certain financial targets thanks to the installation of a new solution, the vendor`s compensation - or certainly a part of it - is now dependant on these goals being achieved. Even if the vendor`s solution is properly installed - and even if it works 100% - the end-user may itself fall short of certain objectives due to its own fault. This, then, impacts on the vendor - and he has little control over it. This is in stark contrast to the hurly-burly 1990s when vendors had end-users at their mercy.
But there is an upside. While vendors are facing a more demanding work environment in which their financial returns become reliant on strict financially-focused SLAs, the risk-sharing has a double-edge sword: for the first time the customer has to view the vendor like a true partner. This also provides more of a safety net for the vendor. It is not that easy to throw the vendor off the project and perhaps, at the end of the day, the vendor is almost guaranteed a sustained, long-term flow of income - as long as he keeps to his part of the contract. If, in this partnership, results are created and trust is built up, the relationship may even turn into something more long-term. The vendor then has a more lasting revenue stream and he can focus less on pitching for new business and more on delivering on objectives agreed upon with the various end-users.
If this leads to better levels of service and better technological solutions from companies - such as banks or retailers - perhaps these benefits can ultimately be passed on to the consumer.
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