By now, we’re all familiar with the notion of pandemic discounts. The question for many is – should you still be asking for them? Pandemic discounts for IT purchases emerged last year as both vendors and their customers experienced massive disruption. Companies immediately began seeking deeper discounts from their vendors in the early days of the global health crisis and had great successes. We saw discounts in the 10 to 15 percent range handed out with a single ask. We then saw compassionate responses which offered to extend payment terms from Net 45 to Net 90.
Today, vendors are responding a little less readily and with a few more strings attached. Enterprises are still able to extract higher discounts and lower pricing from vendors, but in exchange for new, longer-termed commitments. The trade-off may come as surprise to some clients – particularly those whose businesses have been acutely impacted by the pandemic. Some customers have believed because early successes garnered immediate gains, savings would continue to flow.
What we’re finding more often is vendors are reverting back to a business-as-usual approach. As we noted in this published research, IT vendors are under pressure to minimize revenue fallout. Some are offering lower pricing or allowing customers to defer payments in exchange for committing to more spend in the future. And while this is a good opportunity for some companies, it requires careful evaluation.
A Different Way to Approach Pandemic Discounts for IT Purchases
Not every pandemic discount is the result of a direct ask. In fact, rather than create situations where the team is ASKING the vendor for something, it’s possible to create situation where the vendor begins to ask their customer’s procurement team what they need.
One way to accomplish this is to offer bits of information that sow seeds of uncertainty into the minds of the vendors. For example, subtly indicate your organization is looking to make a change. Ask for renewal quotes nine months in advance, ask for an inventory of your licenses, ask for a usage report which shows active users against subscription counts, etc. These are all examples of actions which signify interest in accountability and begin to raise the attention of seasoned sales teams.
This, in effect, forces sales teams to ask questions – and gives you the opportunity to conceal your ask throughout your answers. Your answers should offer a clearer picture of how the pandemic is affecting company profitability and reprioritization of IT spend.
Eventually, we find sales teams will move into protectionist mode and work to ensure their spend dollars are protected. This often turns into inquiries about how they can show their value and commitment to the customer. It is at this time, you can begin to offer thoughts on pandemic discounts for IT purchases and renewals, and how it can transpire into a win-win for both parties.
Why It’s More Important Than Ever to Validate IT Vendor Pricing
Changes to vendors’ pricing and discounting behavior (as well as terms and conditions) have agitated an already murky pricing landscape for IT purchases. What may have been a best-in-class price for your last purchase or renewal may no longer be within fair market value range today.
NPI finds that IT buyers spend more than they need to on IT transactions more than 80 percent of the time. Don’t leave money on the table – validate that your vendor is proposing a price that’s at or better than market. If you’d like to learn more about how you can easily integrate IT price benchmark analysis into your IT sourcing processes, let us know.