We generally apply the “rule of three” to purchasing services for our business; we get three quotes, dismiss the most expensive as “out of touch”, the least expensive as “don’t understand our requirements” and (generally) we plump for the one in the middle as the best balance of cost/risk. Its not a perfect strategy, but it has served us well thus far. In fact, the only time we vary it is when we know the supplier very well or we get quotes where the difference is very small and you can choose based on who makes you feel the most comfortable.
However, the one universal rule we always apply when buying services is that we always dismiss the cheapest option; because in the case of an ongoing service we want to be sure that our “partner” is going to be around for a while and appropriate pricing is key to that.
Now, we are in the business of supplying hosted (or virtual) desktops to SME customers and clearly, although that appears to be a “product”; in reality its a service. Yes, we deliver a tangible thing but IT is something that lives and dies by the quality of support you get and how available it is and good quality support coupled to a highly available service like ours has a cost.
What most people don’t realise is that companies like ours share a similar cost base; we all pay the same amount to Microsoft for every user; we all have similar staff costs (regional variations excepted) and we all have pretty much identical equipment and data centre costs if we are doing the job properly. Let’s assume that the quality companies with quality products in this space will probably have mean pricing variants of about 5% – more than that and something is probably missing, most likely in the quality of the infrastructure where you really don’t want skimping.
In fact (and to quote John Ruskin) : “It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better”
The fact is, that once you’ve handed over your IT services to a third party you have taken a bet on their longevity. Obviously you don’t want to pay way over the odds for any generic service but at the same time, if the selling price is way below the rest of the market then it’s going to be a lot harder for them to keep trading indefinitely. Not a big problem if you’re buying a car or a washing machine, somewhat different if your business is utterly dependent on them being there.
With something you walk away with it matters less; you still have the product and support can probably be obtained elsewhere…but with a service you simply can’t. That cheap hosted desktop quotation could end up being very expensive in the long-run and if your data was unavailable because the company had gone bust, would your business survive?