An improving tech sector in 2005 and 2006 means its time for managers to raise their expectations of the value they receive from vendors. Improving vendor margins, consolidation within the industry, and increased competition are all creating opportunities for enterprises to squeeze vendors and demand better value.
Time for a Squeeze
During the past several years, vendors were fragile. IT cost cutting initiatives and mandatory annual spending reductions from most enterprises meant that vendors were having their margins haggled down to dismally low levels. As vendors searched for ways to extract further revenue from unprofitable contracts, IT buyers were often confronted with scaled back services, legal battles over service agreements, increased supplier churn, and lower quality products. Squeezing vendors in a down economy was risky business.