As surely as the force of gravity pulled Newton’s apple to the ground, IT departments will invariably be governed by the law that says all shops will purchase the cheaper of two apparently equal products or services.
On the surface, there’s nothing wrong with that course of action – it’s just plain sound economics. On the surface, such decisions are to be applauded – and indeed, they usually are by upper management. Saving the company money will always put as IS director in the CEO’s good books.
The only problem with this law of IT nature is that the bargain-priced option often isn’t of equal value. A good example of this flaw was played out in the last couple of years in the Canadian telecom services industry. In 1999, a spate of upstart competitors were nosing quite successfully into the incumbents’ territory, stealing business away at a healthy clip. Converts to the messages of new service providers such as 360Networks and Group Telecom revelled in the knowledge that they no longer had to be bullied by incumbents such as Bell and Telus, and were receiving similar-level service for a better price.
Two years later, however, such customers were back on the Bell doorstep, looking to get their businesses reconnected in the wake of their upstart provider’s demise. It turned out that lower prices and better service, no matter how attractive those points were, ultimately weren’t as important as a carrier’s experience and stability.
Today, with the reincarnated forms of many previously bankrupt challengers cropping up on the Canadian telecom scene, such as the aforementioned 360Networks and Group Telecom, don’t be surprised if the IT department price law holds true in 2003 as strongly as it did in 1999. The restarted upstarts are once again going to hack away at the big guys’ market share by offering lower prices and – brace yourself – service people wearing smiles.
And they will be successful, at least in the short term, because there will be enough IT shops out there that will, like Pavlov’s dogs, respond to the ring of lower prices – especially the perpetually cash-strapped medium-sized firms that the renewed kids on the block are targeting.
No doubt, there will be some forward-thinking managers who will say, “Wait a minute, we got burned the last time we went with these guys, so let’s think about the security that the incumbent is going to offer us – higher price notwithstanding.” But there will also be enough firms who will be willing to bury the past and hope for the best, secure in the knowledge that their next bill, at least, will be lower than their previous one.
Such a decision could be rewarded; there’s a good chance that the upstarts will survive this time around. But IT managers who are contemplating a switch from a more established service provider would be wise to research all they can about an upstart’s viability and then make a decision. By looking only at price differences, they run the risk of getting burned – again.