Benchmarking Service and Technology Contracts

In a traditional benchmarking setting a customer can research a catalog number, part number or even model number of the item being purchased. The research can take place on a platform as simple to access as the internet, or as complex as 3rd party research organizations that allow a customer to view the most recent purchases within a specific industry. Using either methodology will yield results consistent with one single outcome: price comparison. Again, for a commodity this is a simple bellwether check to see if one is in fact “getting a good deal.”

Mapping this type of benchmarking to a services contract is much more complex. Think of a commodity pricing benchmark in a lineal format with two axes represented by volume and price. In other words, how much should one pay for this amount of stuff? This is a pretty simple benchmark to obtain. Now think of services and technology contracts as a matrix, or a complex map of multiple axes if you will. While price and volume still play a factor in this matrix, volumes of other factors begin to enter the benchmarking equation. What one benchmark might consider as acceptable service levels, another might not. This in turn could affect the pricing. When one is considering volume in a services or technology contract it is not fair to say that the price is the only indicator to a better deal. Components such as on-time completion, fail rates, redundancy and growth capabilities or even response times to trouble tickets all weigh in on the volume and pricing aspects of a services and technology contract.

This matrix becomes a difficult map to navigate when comparing prices. Experience plays a huge part. Calling a 3rd party benchmarking company (Gartner, Forrester, MDBuyline) to assist, is a dicey proposition at best. Although each of them can give a company some basic information to consider, these large box services utilize averages and recency effects instead of truly leveraging the most effective negotiable points your organization possesses. These points include your time, budget and relationship with the supplier(s). Each of these plays a crucial role in the benchmarking matrix surrounding services and technology contracts. The key is leveraging each point effectively to obtain the best deal possible at any given time and setting the benchmark.

Don’t let Gartner / Forrester / MDBuyline fool you into thinking a “good pricing benchmark” in a click or call away…it’s much more complex than that. Understand the matrix of services and technology benchmarks and maximize your savings.