The level of discounting and price cutting in the IT industry today is ridiculous. It's like the post-Christmas sales except it lasts all year long.
The networking arena is a good example. At Networld+Interop last week, the managing directors of Australia's four biggest networking companies got together to supposedly debate the issues that matter. You might have expected fireworks, but it was actually a rather tame affair, until the topic of discounting came up. All four agreed that the level of discounting was "ridiculous", yet all said they would continue to do whatever they had to do to win market share. They claimed that the level of discounting was not sustainable, but one has to ask, exactly how are they going to get themselves out of this cycle?
Customers are beginning to expect massive discounts. I know of plenty of occasions too, where as soon as a vendor knows they are out of the running, they bid ridiculous prices just to put the price pressure on the vendor who looks like winning the deal. The industry talks about discounts in excess of 90 per cent. I've personally seen orders where the customer has scored discounts of 80 per cent.
Of course, it's not just the networking arena where prices have been pushed through the floor. We all know how skinny the margins on PC hardware and peripherals are too.
These ridiculous prices don't leave much margin for the reseller or integrator. In fact, it's getting so that the vendor has no room to offer any margin to the middleman and this is why you have the trend of vendors going direct.
The customer may, of course, think they are getting a bonanza, but they're not. The dictum that you get what you pay for has never been truer than it is in the IT industry. I have no sympathy for any customer who screws down their supplier to a stupid price, then in turn finds themselves screwed when they don't get the support or after-sales service they expected.
But we'll continue to see surveys like the one on this week's front page, where users whine that they're not seeing the benefits they expected when they purchased their computer or network. And no doubt, the Attorney General's department and consumer organisations will continue to lambast PC dealers for going broke (as if they wanted to). In a recent ARN report, a spokesperson from the Attorney General's department was quoted as saying it would be introducing education programs to stop consumers getting ripped off.
Well, let's start by telling them that if they want great service, training and support, then they're going to have to pay for it. Buying a computer is not like buying a television or an appliance. It's much more powerful and complex, and more akin to buying a car. And how much sympathy is a consumer going to get if they go out and buy a cheap bomb, don't bother to pay for lessons and then crash it or it breaks down?
E-mail your comments to Philip_Sim@idg.com.au