Buy today, pay tomorrow! The idea of ‘pain sharing’ in IT

What the IT industry needs now is the equivalent of Leon’s Don’t Pay A Cent Event.

Of all the ideas people have offered to help enterprises IT departments get through this recession, none have been more inventive than that of Gartner analyst Mark McDonald, who blogged about the notion of “pain sharing” between senior technology executives and their solution providers. Here’s his definition:

As the term implies, pain sharing involves asking the solution vendor to provide immediate relief from maintenance fees in exchange for higher revenues when times improve. Such an arrangement would in effect move maintenance revenue into the future and help CIOs balance their current budgets.

McDonald recognizes – and goes through – all the obvious impediments to working out a pain-sharing deal. He subtly acknowledges that it could turn solution providers into the IT equivalent of a loan shark. But he makes a point, and a valid one, that unusual times call for unusual measures.

I think the concept of pain sharing would challenge the vendor community considerably, even though they have preached the benefits of pricing flexibility amid the transition to a services-based approach. Usually, of course, the pricing benefits the vendor in the long run, especially when you factor in the hidden tax of maintenance fees. Just as software-as-a-service has given these firms a more predictable source of recurring revenue, pain sharing would in effect give IT departments a recurring source of cost savings, if only temporarily.

Pain sharing could be one tool among many others, but it would be interesting if vendors, desperate for new customers, lead with it rather than have corporate IT departments bring it up first. There are no doubt many organizations that are now going back to their suppliers to renegotiate terms and conditions with all of their suppliers, from office supplies to data centre equipment.

Those discussion could provide an opportunity to explore pain sharing, but they could lead to other decisions as well. Is pain sharing more challenging than rewriting your service level agreements? Is it worse than cutting that supplier for someone cheaper or more flexible, and redeploying business processes on an alternate platform? Yes, pain sharing just puts off the inevitable, but might that extra time provide an opportunity to outlast or outmanoeuvre competitors?

Pain sharing, if nothing else, would do much to illustrate the level of confidence the IT industry has in the future. If you’re up for pain sharing, you must believe at some level that the recession will end relatively soon. If you rule it out completely, you don’t. Some might say we all bet on the economy last year and lost. Pain sharing is a provocative invitation to see if we have the stomach to gamble once again.

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