Is there anything more nonsensical in Enterprise IT than ‘list price’? Having worked both sides of the fence, I have got to say no!
I have come to the conclusion that list price only exists to allow vendors to discount and to keep procurement departments in jobs.
Is that your best and final price? Really? Oh, there’s a bit more? You’ve still lost the deal! Oh, there’s still a bit more to come? It’s not an Enterprise deal, it’s a bazaar with big numbers!
It’s like the dumbest game of bluff ever. I’ve had sales-guys ask me, ‘What percentage are your procurement guys targeted on? Just to ensure there is something left for the procurement team to negotiate.’
And then you get articles which quote list prices or perhaps it’s a street price? Or perhaps it’s a skewed article which compares a list price to a street price.
Of course, us users aren’t much better. I remember when IBM at one point decided to try and slash their prices down to something realistic; there were going to be no more special bids. Big customers did not like this, they wanted to play the discount game. And so the special bid process remains!
It’s such a monumental waste of time!
Don’t forget a big part is money made on maintenance. It’s determined by list, not by sale price… Companies love recurring revenue and inflated list prices are way to maintain that. I know you know this, but some readers may not be aware that most maintenance prices are in the 18% to 22% range.
A box that lists at $1m with a sale price of $250k will bring $200k a year in without any further effort for as long as a customer has the box. People tend to focus on acquisition price and as long as they feel they beat their vendor up enough, they are generally happy.