Software Renewals - Monopoly / Cartel ?
Discussion
I'm interested in the views from others involved in CAD industry - more specifically those who are responsible for the software renewals and maintenance of the different software(s) for their respective companies.
How do you get on with ensuring you are receiving best value from your software renewal quotations from the various software resellers ??
Without mentioning particular resellers or even the CAD software involved (we run most of the different systems and this has happened before) I personally have received a renewal from one of our current resellers and to ensure we're getting best value, I have approached a number of competitive vendors (same CAD software system) for competitive quotes.
It appears I am not allowed to do this - apparently I have to go with the one quote provided and other resellers are not allowed to quote me.
Note, other resellers are not approaching me for our business, it is me asking them for quotations - easy business for them you would think . . . .
Compare this to other industries - for example buying a new car.
I fancy a Ford Focus, am I only allowed to go to one dealer or am I allowed to go to any number I so choose ?
Are the dealers allowed to offer me different pricing structures depending on how eager they are for the business or are they not allowed to quote me ?
Personally I think this is a monopoly system and unfair on us as the end user - what are other people's views ?
I'm all for bouncing this to the CMA for investigation or am I overreacting ?
How do you get on with ensuring you are receiving best value from your software renewal quotations from the various software resellers ??
Without mentioning particular resellers or even the CAD software involved (we run most of the different systems and this has happened before) I personally have received a renewal from one of our current resellers and to ensure we're getting best value, I have approached a number of competitive vendors (same CAD software system) for competitive quotes.
It appears I am not allowed to do this - apparently I have to go with the one quote provided and other resellers are not allowed to quote me.
Note, other resellers are not approaching me for our business, it is me asking them for quotations - easy business for them you would think . . . .
Compare this to other industries - for example buying a new car.
I fancy a Ford Focus, am I only allowed to go to one dealer or am I allowed to go to any number I so choose ?
Are the dealers allowed to offer me different pricing structures depending on how eager they are for the business or are they not allowed to quote me ?
Personally I think this is a monopoly system and unfair on us as the end user - what are other people's views ?
I'm all for bouncing this to the CMA for investigation or am I overreacting ?
Edited by MikeOxhard on Tuesday 29th August 12:20
Stormfly1985 said:
Who says you can't approach different resellers for the same product? I don't know of any legislation that prevents businesses shopping around for the products they use.
The overall UK software supplier - I've approached 3 resellers and same response from 2 - can't quote you as you are with a competitor - 3rd one has not even send response.I've completed CMA paperwork to report as a cartel / monopoly - seems like a stitch up somewhere !
MikeOxhard said:
Stormfly1985 said:
Who says you can't approach different resellers for the same product? I don't know of any legislation that prevents businesses shopping around for the products they use.
The overall UK software supplier - I've approached 3 resellers and same response from 2 - can't quote you as you are with a competitor - 3rd one has not even send response.I've completed CMA paperwork to report as a cartel / monopoly - seems like a stitch up somewhere !
maffski said:
When I worked at a company which was doing install/service/maintenance for phone systems several manufacturers worked like this - we would register the lead with the manufacturer and no other agent would quote against us per a period of time. The manufacturers did it so there wasn't a fight to the bottom over labour rates, which in turn allowed them to keep the costs for being approved nice and high.
If Heinz were doing this for baked beans (once you buy a tin from Tesco you can't buy one from Asda for X months) surely there would be massive outrage etc, no?Stormfly1985 said:
Who says you can't approach different resellers for the same product? I don't know of any legislation that prevents businesses shopping around for the products they use.
It's like that for a few things that I'm a reseller for. The supplier has to look after their 'channel partners' as they do a lot of their sales grunt work. The reseller gets margin off RRP and gets to 'own' that customer to prevent channel partners bidding against each other and nibbling the margin away, which would remove the incentive for anyone to resell their product.They're supposed to just quote you RRP unless there's another value add in the package. The only time you might get much below RRP is if you're a new customer not tied to any particular product and reseller yet.
There is a cost of sale for complex software which means you cannot compare with baked beans. In the world I am in (SW but not CAD) vendors try to prevent the following:
Reseller1, invests time (& £) in initial Sales & marketing, training of their staff, consulting, pre-sales/solution design, over many months. Reseller2 comes along at the last minute, having incurred no cost, and quotes a lower price. If the vendor offers no protection against this, Reseller1 will stop selling the Vendors solution in favour of another, where there is some protection.
For a vendor - resellers good at finding new business are the most valuable, (anybody can collect a renewal) - so the vendor wants to protect the partners that bring new customers (and who have also invested much more learning & marketing the vendors solution).
So the vendor has to lay out the rules. (Std Margin/discounts, Deal Registration incentives (margin/discount, for the business that 'finds' the customer first etc)). When planning their portfolio, Resellers consider vendors rules around initial sales & renewal very carefully. The reseller will work harder (at more cost) to win initial business, that comes with a likely renewal.
At renewal - the incumbent 'Reseller1' in this case, will usually be given more margin than Reseller2 - if the product RRP is £100, and Reseller1 receives 10% Margin, Reseller2 may only get 5%
Both know that if Reseller2 quote at thier cost price (£0 profit), Reseller1 could match and still make a profit. If Reseller2 does this (selling renewals at below RRP, to buy business), without bringing the vendor much new business, then the Vendor may decide to stop working with reseller2, as their best resellers will become frustrated. So in most cases, you will find that reseller2 - if they are playing fair will at best offer you pricing at or very close to RRP. They do this on the off chance that the customer is genuinely looking to move away from their original reseller(1) for reasons other than price. Other resellers believe that the customer may be either trying to barter down Reseller1, or have no loyalty to their partner, and do not even bother replying.
In my experience, the vendor does not stop Reseller2 from quoting, but will offer no additional discounts, incentives or sales support.
I've just re-read that - and while it reads ok to me, I hope it makes sense!
Reseller1, invests time (& £) in initial Sales & marketing, training of their staff, consulting, pre-sales/solution design, over many months. Reseller2 comes along at the last minute, having incurred no cost, and quotes a lower price. If the vendor offers no protection against this, Reseller1 will stop selling the Vendors solution in favour of another, where there is some protection.
For a vendor - resellers good at finding new business are the most valuable, (anybody can collect a renewal) - so the vendor wants to protect the partners that bring new customers (and who have also invested much more learning & marketing the vendors solution).
So the vendor has to lay out the rules. (Std Margin/discounts, Deal Registration incentives (margin/discount, for the business that 'finds' the customer first etc)). When planning their portfolio, Resellers consider vendors rules around initial sales & renewal very carefully. The reseller will work harder (at more cost) to win initial business, that comes with a likely renewal.
At renewal - the incumbent 'Reseller1' in this case, will usually be given more margin than Reseller2 - if the product RRP is £100, and Reseller1 receives 10% Margin, Reseller2 may only get 5%
Both know that if Reseller2 quote at thier cost price (£0 profit), Reseller1 could match and still make a profit. If Reseller2 does this (selling renewals at below RRP, to buy business), without bringing the vendor much new business, then the Vendor may decide to stop working with reseller2, as their best resellers will become frustrated. So in most cases, you will find that reseller2 - if they are playing fair will at best offer you pricing at or very close to RRP. They do this on the off chance that the customer is genuinely looking to move away from their original reseller(1) for reasons other than price. Other resellers believe that the customer may be either trying to barter down Reseller1, or have no loyalty to their partner, and do not even bother replying.
In my experience, the vendor does not stop Reseller2 from quoting, but will offer no additional discounts, incentives or sales support.
I've just re-read that - and while it reads ok to me, I hope it makes sense!
Edited by Australiam on Wednesday 30th August 15:35
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