Crowdsourcing Contract Negotiations

Reposted from January, 2010

The emergence of social spending analysis has enterprise implications – even if you’re not a retailer. Blippy, the first service provider in the space, delivers a live feed of purchase data from registered users’ credit cards. It also provides segmented data for specific retailers, though not in depth. For example, as of the moment I write this sentence, 33,544 purchases were made at Apple’s iTunes store by 2,704 Blippers since it went ‘live’ in mid-January 2010. I can’t (yet) see total dollar value, geographic, or demographic specifics… though Blippy owns all that. Maybe for more fine-grained cuts of the data, I’ll need to upgrade my Blippy to Platinum. I hope it doesn’t hurt as much as a knee replacement.

Why, though, do people willingly submit their purchase information (“Blippy is a fun and easy way to see and discuss the things people are buying. Automatically share your favorite purchases from iTunes, Amazon, Groupon, Woot, Zappos, Visa, MasterCard, and more”)? It’s a logical extension of the Twitter model (which is a fun and easy way to see and discuss the things people are thinking or doing). People you follow – and who follow you – share ideas and information often in tiny increments. Blippy and Twitter might co-exist in this sample scenario:

Twitter: @tobybell: “Just pre-ordered my iPad. Delivery to be advised.”
Blippy: “TobyBell Spent $499 Pre-Auth at Apple”
Twitter: @tobybell: “Woot!! Am 4 millionth in line for Apple’s expensive Kindle alternative. Getting coffee at Starbuck’s to celebrate!”
Blippy: “TobyBell spent $0.79 on coffee at BP Gas Station”

And people can comment on all that! Fun!

So, as you might imagine, I don’t care about Blippy. Even if its name is a charming reference to radar. But I do care about the implications of technology for my clients. And, because the recent global economic woes have spurred a large number of inquiries about technology contract details, it seems possible that the emergence of Blippy foretells a more impactful event: the emergence of transparency in software and services pricing for procurement of big-ticket systems.

Today, for example, if a line of business leader in property and casualty insurance wants to revamp the claims handling process to be more dynamic, collaborative, and cost-effective, he or she is likely to start the project by evaluating the present system. And all its interfaces, custom code, support requirements, user population and acceptance, other stakeholders, software and service providers, and estimated maintenance costs.  This is the Run Rate. Unless moving away from Run Rate (which is easy to budget for as it continues the same spending year over year) moves the business closer to new, improved, and calculable values, it is hard to get sponsorship for change. So the software business is less about new licenses and more about maintenance. The services business is less about initial engagement than support and follow-on work.  I call this pairing Software Stockholm Syndrome and Services Stockholm Syndrome.

Wikipedia defines Stockholm syndrome as “a term used to describe a paradoxical psychological phenomenon wherein hostages express adulation and have positive feelings towards their captors that appear irrational in light of the danger or risk endured by the victims”. So, I am suggesting enterprises are in some ways captive to vendors. Shocking, I know. But I think – after having reviewed dozens and dozens of million-dollar software and services proposals – part of the problem is a general lack of transparency about the specific cost of systems.  I can’t tell you how many times I’ve been asked for even ballpark estimates of average per-seat, per-hour, or per-server costs. Obviously, it would violate all kinds of Gartner guidelines for me to post all the bids from all the vendors sent to all the clients. Gartner delivers the technology-related insight necessary for our clients to make the right decisions every day. We don’t deliver discount price lists or negotiate lower fees.

But you can. Granted, it won’t be through Blippy – unless you use a corporate debit card to buy your next CRM or ECM suite. All it takes, perhaps, is a Facebook Group. Set one up for your industry, geography, department, or whatever. Call it “Anonymous Financial Services Procurement Pro” or “Legal Technology Spend Analyst” – just don’t use your regular Facebook name unless you don’t mind repercussions. Throw some real numbers out there: “Just signed a $475K contract for a 3-year software and services deal with (insert vendor here). 400 seats, 2 servers, 20TB of cloud-hosted storage. Did I get a good deal?” Get feedback. Invite others. Repeat. Maybe look for people with similar titles and interests on LinkedIn and connect.

The nice thing about Blippy is that it makes spending a social skill. Enterprises may not be willing to expose their technology spend to similar public scrutiny, but (somewhat) anonymous peer review is now possible and a positive first step toward transparency. Now, I completely understand why software vendors are willing to discount licenses in favor of other value propositions like maintenance, services, hardware, or references. Many similar businesses have made a successful transition toward democratized pricing information. Did the auto business suffer broadly just because average buying costs became a matter of public record? Oh… that’s right. It did.

For the record: I give Blippy six months unless a major conversion of its business model occurs. If it is re-launched as a software and professional services buyer resource on a paid subscription basis, I give it one year until competition from free providers overwhelms it. If exactly the same technology were part of Gartner’s Web site and also part of our subscription model for IT execs and business leaders, I’d give it a much better chance. Of course, it may have an effect on our relationship with vendor clients. But at least they’d know what the competition was offering. Is Blippy a signal of what could happen in enterprise software and services soon enough? Let me know what you think.

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