The Meaning of your Communication ...

I had an interesting experience on a large conference call with a vendor team during the week. They are competing for a significant piece of infrastructure business with our company and we are getting closer to a decision and ultimately placing an order with somebody.

To be honest we’ve been in a bit of analysis paralysis for a while as we’ve considered many complex interdependent decisions on the journey to hitting our key target which is a significant reduction in our annual expense rate. If that was important before Covid19 hit, I can only begin to imagine the focus it will get when we re-emerge to the new normal, whenever that is.

Our approach to getting to a decision has been to examine our five-year Total Cost of Ownership for this major infrastructure capability (commodity virtual machines in this case) and considering a wide range of options from our current “three-tier” approach to a variety of Hyper-Converged Infrastructure (HCI) and Cloud IaaS offerings. We also get to consider the pros and cons of forklifting (and writing off) a lot of existing kit vs phasing in the new, lower run rate alternatives. Our current thinking is that there is value from several perspectives in phasing in the introduction of the new technology, and also probably value in having a balanced portfolio of baskets in which to place our eggs (at least in the near future).

This week we find a mix of variables at play:

• We are moving the goalposts from our original RFP to consider buying substantially the same amount of capacity, but in staggered tranches over time without absolute guarantees beyond the first tranche;
• We are coming close to the quarter end for a number of US-HQed technology companies which always results in higher activity and energy levels from our suppliers;
• There are signs of an uptick in infrastructure component costs (SSDs, RAM etc) from early May as a result of supply-demand mismatches stemming from the supply chain impact of Covid19, which is presented as a reason to buy before the end of April, but actually could reinforce the logic of spreading (or delaying) the purchase;
• Interestingly, but somewhat unrelated, it has also been curious to see that its nigh impossible to spin up an adhoc on-demand VM in Microsoft Azure at the moment due to Covid19 demand spikes (whether that’s a massive uptick in Microsoft Teams usage, prioritised kit for critical services or whatever) – it answers the question as to whether the scale of Cloud infrastructure providers is “so big” that there is “infinite capacity”. We’ve hit the short-term supply ceiling in this crisis.

Anyhow we briefed the competing bidders this week and got into a circular discussion on one of the calls where it was suggested that “we are under pressure do get this deal done”. I remarked that we (as the customer) didn’t feel under any pressure at all; that we would make a purchasing decision at the time that was right for us, and in quantities that gave us the best smoothing across our P&L, delivering a component of the long run expense reduction that is a key driver for our business. The conversation continued to discuss “the pressure” and I injected what in some quarters is called a “pattern interrupt”.

I proffered that “I couldn’t give a <insert your preferred colloquialism> whether we do a deal in April or May or beyond”, that we’d do a deal when we were good and ready, and not before and if price increases or other factors meant we’d do a deal with a different organisation meeting our criteria that would be well and good.

When it comes to commercial transactions, I’m fairly black-and-white. Everybody is entitled to respect, professional courtesy and equal treatment. There might be a longer relationship with some players, or particularly in Ireland which is a small pond, overlapping friendships or connections. A level of relationship is important as there needs to be trust and a sense that while we expect a vendor to honour the letter of any contract, we also need to ensure they honour the spirit of it and will be willing to provide a high level of service if things go wrong. However, a commercial procurement process admits no favourites and in the “premiership” of enterprise selling we all play for our own teams.

Enterprise selling has lots of templates and formulas, including the process of trying to “mark” different personas on the customer side: the economic buyer (who controls the budget or the decision to spend), the technical buyer (who assesses the perceived value of the features on offer), the user buyer (the teams or people who will use what is purchased) and even a coach (someone on the inside of the organisation who can help you get to a win).

There are also lots of pressure tactics like: sign now or the price is going up, sign before the end of this quarter and you’ll get the best deal and your boss, or bosses boss getting a call from the CEO/Sales Director of the vendor to trade off at that level.

Another is the vendor-provided TCO model which shows how you’ll save 20 FTE (but you only have 10 people today!). That often gets down to the difference between “hard” savings: entirely tangible cost reductions that are close to 100% certain to get made and “soft” savings where you save an hour a week across your 5,000 people which is theoretically a 157 person workforce reduction. In truth the latter just means a longer lunchbreak for everyone once a week, rather than any staff being freed up for new roles, or leaving the organisation. It’s not that those benefits aren’t real, but they may not lead to expense reduction which means they are not real when it comes to justifying the investment.

And of course there is no such thing as “perfect knowledge”: buyers don’t always fully understand a vendors offering until after they buy it (which is what can lead to buyer’s remorse: If I knew then, what I know now!, and occasionally delight: it has this great feature that we didn’t fully understand before we bought it) and equally, unsuccessful bidders can be left with a sour taste that if we buyers had properly understood their pitch we would have bought their product and actually achieved our goals.

It is hard. I’ve been on both sides of that table and the key is really working hard to get inside the customer’s head and understand their needs and perspective and avoid trying to convert the soundbites of that understanding into what you need to hear to meet your quarter end or sales target.

I’m blunt. I will not take a meeting or call if I know we aren’t in the market to buy (no budget, decision made elsewhere, already committed for X more years etc). I’m qualifying early on whether we are wasting each other’s time and am likely to get to “No” rather than “Yes” earlier than most. Once I understand what your proposition is, it’ll sit there at the back of my mind until we are in the market for a solution. I’m happy to be a coach if I feel like it’s a good thing for our company. In general, I think incumbents have it too easy, and need to be willing to give us the best deal possible, ahead of a new business win, as a reward for our long-term business. I think the underdogs deserve a chance: but equally they must be willing to outpace the incumbents through a game-changing functional offering and radically change the price proposition. Many of those ideas played out well in our mainframe replatforming which achieved an 80% reduction on infrastructure cost. That’s a high bar though, and rarely achieved.

Fundamentally though, the world is changing and things are improving all the time. In our industry like every other one we are expected to do more for less. That means that in our technology spend we need to find smarter and cheaper mousetraps, not simply more features at the same pricepoint. We need to see like-for-like expense reducing every year – which means that we need our vendors to be doing the same for us.

As a teenager I sold consumer electrical goods. In 1988 a decent VHS video recorder cost €850. It was a Mitsubishi HS318 (I have a memory for model numbers). The freeze frame meant a small band of wavy lines in the middle of a screen. Today a better version of the recorder facility is built into the set top box, I can get a decent DVD player for €99 and anyway most of the quality content we watch is being streamed online for a subscription fee and I get a photo quality picture when I hit the pause button. This same pattern is demanded by our customers at all times in our businesses.

So, when it comes to the buying process, I’m dogged, friendly at a personal level, but detached at the transactional.

I got a note from the vendor account manager the day after that conference call to say some of his team were a bit offended by my language and tone on the call. Clearly that wasn’t my intention but I’m a great believer in the Gregory Bateson maxim: “the meaning of your communication is the response you get” so I had to take that on the chin. Honestly though, it does qualify as tame business vernacular in this part of the world.

Sorry guys, I got it wrong and could have been more eloquent. The truth is that I could give a damn, but not about the same things that you do. We need to recognise that sometimes we care about different things, and that a good outcome for one is not necessarily a good outcome for the other. True win-win has to deliver the goods for both parties.