“Innovation Investments,” Discounts and Monopoly Money

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Monopoly

Jeff Seabloom, Managing Director-

As enterprise technology vendors scramble to gain market share, we’re seeing a significant new trend emerging where customers are offered myriad “discounts” on core products. These are presented under the guise of a wide range of nebulous terms such as “special services,” “training,” “consulting,” and – a new term being used quite frequently – “innovation investment.”

I was recently involved in a negotiation where a major hardware vendor’s premium product – which is never discounted – was offered at a significant mark down. This didn’t seem right, so I did some exploring to decompose the actual deliverables and found that the “free” training and special services that were added as a special deal incentive were in fact charged elsewhere in the contract. And, upon further exploration into what this “training” and “special services” would entail in terms of vendor resources, it was clear that the answer would be, not very much at all.

In other words, the shuffling around of charges created the appearance of a discount, when in fact there was none.

This is all perfectly legal and very common. But the growing use of these “bundles” raises some important issues. The obvious concern is that buyers don’t have an understanding of the entire pricing picture and quote. Perhaps more importantly, this strategy creates an inaccurate representation of the playing field and makes it increasingly difficult for buyers to understand what they’re paying for products and services, and how their fees compare to what the market will and should bear.

Enterprise clients need to take a close look at the details of their agreement terms and demand to know specifically what they are paying for and what they are getting. This includes defining what exactly is meant by terms such as training, special services and innovation investments. That’s the only way to ensure that the incentives vendors are putting on the table aren’t made of monopoly money.

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