Buying Products & Services

Business Relationship Skills



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How you buy goods and services for your business information system has a great influence on the final results. Spending way too much is a real pain, spending just a tiny bit too little can result in total loss of your investment. A clear plan and experienced partners will lead to success and profitability.

Partners - Why?

The first question you must honestly answer: "Am I a business person, or am I a computer hobbyist?" No other factor will so color your relationship with your system, your vendors and your service providers. The business person understands the value of his or her time to the business, and that the business is where it is most effectively spent. A computer hobbyist will cheerfully ignore a 10/1 ratio of time-value / dollars-saved doing it himself.

A business person understands investment, and return on investment, and making an adequate investment to get the desired return. The desired return is called "profit". Such investments need to be solid and problem free. A computer hobbyist understands wiz bang technology for the sake of technology and loves to brag about difficult problems he has solved.

Now, I do not imply being a computer hobbyist is wrong in any way, or dishonorable, and it may be very rewarding to the hobbyist personally, it just may not be so rewarding to the business as the time differently applied. Early in the PC era, specialized software companies tended to be founded by business owners who had lovingly developed the software themselves for their own business - because the software was all they had left when the business folded.

If you decide you are a business person, you will need to partner with computer specialists to achieve your information system goals. Your job is to clearly and realistically define your business needs and goals. The specialist's job is to specify and successfully implement the technologies best suited to your needs and goals. You can't afford to know what those technologies are, except in broad outline, and certainly can't afford to know how to implement them, because keeping up with technology is way more than a full time job. (Index)

Partners - How?

More difficult decisions: selecting an information systems partner and judging effectiveness related to cost. It isn't nearly as easy as you could wish.

Unlike medicine and law, fields of similar complexity, there are no meaningful professional associations like the AMA or Bar Association setting standards. There are certifications by major vendors, like Microsoft (MCSE, MCSP), Novell (CNE), and SCO (Ace), but these expensive certifications are often obtained specifically to cover a woeful lack of actual experience. Many of the most effective professionals have no certifications at all.

Then there's the matter of cost. Experienced professionals charge a lot more per hour than your nephew the computer wiz. On the other hand, 30 hours at $30 is a lot more money than 3 hours at $120, and ties up your computer systems for the extra 27 hours (at what cost you?). Real professionals have in-house equipment, so yours won't be tied up with development work. One would also expect the "expensive" professional to bring a lot of real business expertise to the table, so the wheel needn't be reinvented entirely at your expense (unless you really do need a new kind of wheel).

Complicating all this, the very highest rates are charged by those selling image rather than substance. Big name consulting firms are absolute masters of this ploy (and have lots of certifications). They'll happily bill raw trainees at $250 / hr (but those trainees wear really nice suits, so they must be worth it). So this leaves references and years in business as the best indicators (most computer related business last less than two years). (Index)

Partners - Who?

You should select a partner scaled proportionally to your own business. If you are a small business, big consultancies and integrators will handle you on a "formula" basis, paying little attention to unique needs. On the other hand, a lone practitioner, however skilled, may not have sufficient resources to support a larger business.

Experience with businesses similar to yours is essential. Computer systems are not generic. A partner who does mostly law firms will be of little help if you are retail point of sale, and a computer expert without manufacturing experience may not understand your manufacturing flow at all.

So, you must qualify prospective information system partners - but - they must qualify you as well. An effective partner must see you as willing to invest adequately for success. They must see that you respect the quality, experience and skills they bring. They must see your business as fitting their expertise or it will cost too much to support you. They must see you as profitable to do business with. Hint: the fastest way to be disqualified is to display a copy of Computer Shopper on your desk - a red flag if there ever was one.

If you find you cannot attract or keep an effective business system partner, you need to examine your approach. Are you looking in the right place? Do you convey the right impression and back it up with performance? Always remember, you are dealing with professionals, not employees. They have made a heavy investment in the tools they bring to you, and have every right to expect a comfortable return on that investment. (Index)

How to Buy - Price, Support and Other Issues

RULE: "IBM PC compatible" is a myth. Computers and their components are incredibly complex, and depend on very complex timing cycles. A component that works fine with one computer may not work at all with another.

RULE: The overhead cost of purchasing a computer product can be greater than the cost of the product itself. Here are elements that figure into the cost of a computer component:

  • Research what to buy ($/hr)
  • Find where it can be bought at what price ($/hr)
  • Cost to purchase ($/hr)
  • Shipping (or cost to pick up (much higher)) ($)
  • Cost of component ($)
  • Cost to configure the component into operating system software ($/hr)
  • Cost to verify correct function and usability ($/hr)
  • Cost to diagnose failure and obtain replacement (%$/hr)

If you work with an integrator who sells equipment, his/her prices will be significantly higher than you may see advertised. If you are a business person, you will understand why - the integrator is absorbing a considerable amount of the overhead cost and risk, more efficiently than you could, and is spreading it among multiple clients - your true cost is less, probably a lot less.

If you are a hobbyist, you are not valuing your time, so the cost from the integrator is higher. Of course, if your purchase creates problems you cannot handle yourself, the integrator will send you a "guilt free" invoice for the entire cost of handling the problem. Many integrators will actually encourage you to buy stuff yourself because they love those "guilt free" invoices so much.

If you work with a consultant or integrator, you will find they recommend only a narrow range of products, probably not including the great new products you are reading about in the magazines. They recommend what they know works together and what they know enough about to support, and are spreading the cost of experience over multiple clients. If you insist on the latest wiz-bang product, your true costs are likely to be very much higher.

Reports from shoppers at the big computer warehouse stores tell that a very high proportion of the merchandise on the shelves has already been returned by a previous purchaser. Every one of these returned items represents a lot of time wasted by the previous purchaser. Sometimes the product is actually defective, and may have been purchased and returned more than once. It is clear a business cannot afford this.

Mailorder has similar problems, but returns are more difficult and take more time. Fortunately, the average mailorder buyer is a bit more knowledgeable than the average warehouse buyer and understands the risks they are taking. Mailorder components at sharply lower than normal prices are probably at least one revision out of date, and may not work with newer products. This is usually stated for software, but almost never stated for hardware.

RULE: Buy what your technology partner supports. Original purchase may be higher, but your true cost will be much less. (Index)

Quality - The Industry's Dirty Little Secret

Desktop Computers are highly competitive products, placing severe cost pressure on component manufacturers. Cost, and an unceasing demand for "bigger, faster, cheaper" results in manufacturing processes that are on the raw edge of possibility. Quality of product, even among individual units from the same production run, is highly variable, especially for hard disk drives, CPU chips, Video Processors, and the like.

Parts are tested and sorted by performance and quality at the end of the production line. The best go to prime customers, and the marginal ones go to the "lowest cost" market. Cost pressures are so great, every part that actually functions must be sold.

Once the product leaves the manufacturer there is no way to determine its quality status - all are marked exactly the same, and only the manufacturer has the test rigs to determine quality. The only way to assure you are getting "primes" rather than "culls" is to know who handled the product on its way to you.

This little known process goes a long way to explain the high failure rate of "best name brand" components purchased from "lowest price" vendors. (Index)

Benchmarks and Comparative Reviews - Meaningful?

Benchmarks: The best benchmarks will be posted by the company best at cheating on benchmarks (Apple produced some real whoppers for the iMac).

A product tuned for benchmarks may be cranky and may work properly under only a narrow band of conditions. "Buying by benchmarks" puts you at risk of purchasing equipment that does not work well (or at all) in your circumstances.

Comparative Reviews: Here's how comparative reviews are handled by magazines.

  • List all the features of the market leader (generally the product with the biggest advertising budget).
  • Sharply criticize alternative products for any feature they do not include, whether or not the feature is useful, even if the feature doesn't work well in the market leader.
  • Ignore any feature an alternative product has that is not included in market leader, no matter how useful that feature may be.
  • Sharply criticize any feature that does not work exactly the same as a feature in the market leader, even if the alternative works better. "Users will be confused."
  • Completely ignore practicality, usability and performance. These are not "quantitative measurements".
  • If all else fails, add the line "[Leading Product] will include all these features in its next revision, so we recommend a wait and see attitude".
  • Publish the least offensive of the many angry letters received from users of alternative products and explain, "we can't compare features not included in the market leading product".

This is not an exaggeration. In the magazine business, the "right" product has to win, but it has to appear fair (kind of like Professional Wrestling on TV). Advertising revenue is at stake!

I remember when DR-DOS came out, including a real (and usable!) full screen system editor. Reviewers panned it for not having Microsoft's EDLIN, unquestionably the worst system editor ever included in a shipping product. Of course, the next version of MS-DOS had a full screen editor too, though one that was not as good.

Are Comparative Reviews Important? Yes. Users of PC software are constantly complaining that products are too complex and too difficult to use. Products that actually are easier to use and less complex fail quickly in the marketplace because they fall short in the feature lists of comparative reviews. People buy the product that got the best reviews, not the one that is most usable.
(Index)

©:Andrew Grygus - Automation Access - www.aaxnet.com - aax@aaxnet.com
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