Is Price-Based Business Planning Wise?

Jun 13, 2017

owl-eyesThe City of Winnipeg business planning team recently made a wise decision, ensuring their purchasing process for waste-collection services is based on qualifications of the winning company, not strictly based on budget.

Why is this worth noting?

Most companies (and cities) base their vendor and partnership decisions on a pricing model. The idea is to ensure revenue and budgets goals are met. Wisdom dictates this is completely backwards from how it should be.

Cal Harrison, University Lecturer for University Manitoba, Winnipeg and Royal Roads, has pointed out in his recent article that: “Since 1972, federal legislation (The Brooks Act) in the United States has made it illegal to use price as any part of the decision process when selecting architects or engineers for US federal government projects. Since then 46 states have also adopted state-level versions of the legislation and the reason is simply that when you try and save a few bucks at the front end of big projects by choosing contractors on low price (even if price is only a small percentage of the decision weighting), you inevitably get less, but pay more over the long run.”

This is certainly true in the I.T. industry, too. Many companies do an RFP (Request for Proposal) for their business planning. This is detailed and informative but is a “simple” way of getting multiple sales quotes. (I say “simple” because filling out a proper RFP can take a very long time, for both parties).

There are some important questions you’ll want to ask any I.T. services company, many of which can tell you quickly if this is the right relationship for you.

Can you provide me with some reference companies to speak to?
Do you offer different levels of support
What are your response times?
Will we get a dedicated account manager?
Can we only call when we have a problem?
Do you supply hardware as well as support?business-planning-questions
What exactly do you support in your contract (does it include peripherals such as printers, mobiles, etc)?
What isn’t covered in the support contract?
Do you provide remote management and monitoring?
Do they have testimonials and case studies from other satisfied customers?
Tell me about your partnership with other IT companies?
What do you believe makes your service unique?

As a business owner, it is invaluable to take the time and converse with two to three vendors before making a decision. It’s also important for owners to be involved in the decision process! Many owners will defer the decision to a CFO or Controller, with mixed results.

Cost is one factor when business planning and shopping an I.T. parter but the old adage stands true, “You get what you pay for”. Happy shopping!

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