Cut-rate integration: The downside

A few months ago, I got back into fencing to get some exercise and, I hope, cheat middle age for a little while longer. Having already enjoyed the sport during my college days, I dug my old equipment out of the garage and joined a nearby fencing club, recalling that after a hard day’s work there’s something therapeutic about going after someone with a saber – knowing that both parties will wake up with everything intact the next day.

The old gear worked fine until last week, when a small chunk fell out of my mask during an especially spirited bout. The damage didn’t look all that threatening. But when the coach realized I was using a mask older than some of my opponents, he explained that the device that protects my face from permanent disfigurement might not be a good place to save a few bucks. Because small holes often beget larger holes, I bought a new mask.

The experience brought to mind a range of strategies people use to save money – and sometimes put at risk, or outright surrender, things that are far more valuable than the actual savings. Case in point: users’ relationships with integrators and value-added resellers (VAR).

Given the high levels of competition in this area, IT managers often play one channel partner against another to get low upfront bids for projects that a few years ago would have been more costly. This often results in integrators and VARs poaching clients from one another after a competitor has invested substantial time and energy in the design phase. While this might look like a wonderful way for IT managers to reduce expenses, it carries long-range costs that should be factored into the equation.

First, the integrator that just lost the deal lost more than revenue potential; it lost real dollars associated with the upfront costs of the pre-sales efforts. Second, the poacher is often working with a lower-cost model that was secured by cutting expenses such as training, certification and support capabilities that could well be crucial to you over the long haul.

Another strategy involves negotiating the deal past the partner’s obvious threshold of pain. With competent people on both sides of the table, this is less likely to happen, but when a negotiator is inexperienced or has an emotional need to close a deal, strange things can happen.

The bad news is that when the emotional need to close a deal has been fulfilled, the buyer’s wonderfully advantageous deal turns into a very low-margin support burden in the eyes of the channel partner. If the client who comes in after you is nowhere near as good a negotiator and yields a better margin for the channel partner, which client do you think the partner will take care of first when you both need help?

I’m not saying that negotiation and cost-control are bad. But success hinges more substantially on a long-term approach to all facets of business, including partnering. The win-win concept rules here because short-term advantages are sometimes just too costly when you look at their long-term impacts.

Presti is research director of IDC’s Network Channels and Alliances service. He can be reached at kpresti@idc.com.