Business Daily from THE HINDU group of publications
Friday, Sep 11, 2009
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Business Daily from THE HINDU group of publications Friday, Sep 11, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Info-Tech
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Software Clients go for Tier-II vendors due to lower billing rates, says Forrester report Our Bureau Bangalore, Sept. 10 Though mid-sized vendors offer lower rates, are flexible and easy to work with and offer niche capabilities, Forrester Research said that there are pitfalls that prevent such a simple vendor selection process from delivering long-term value. In a recent report, Mr Sudin Apte, Senior Analyst at Forrester Research, said many clients, mostly who use the time-and-material pricing model, believe that the Tier-II suppliers offer 10-20 per cent lower rates compared with the large vendors. The report also quoted service buyers who said Tier-II vendors are more nimble in situations such as accepting change orders, committing company-specific payment and contract terms and agreeing to stringent service-level agreements. Further, Mr Apte argued that many customers say that the Tier-I firms are no longer interested in small deals, are pushy about work ramp-up time and have lost the personal touch as their headcount have risen to over one lakh. On the other hand, these clients found that the Tier-II providers are hungry for business and willing to work the way the top players served their clients about five years ago. But these seemingly powerful advantages often leave clients dissatisfied with providers after two to three years, said Mr Apte. Lower rates don’t necessarily mean lower overall cost. In the final analysis, billing rate is a part of the project cost. The provider’s productivity, technology excellence, team configuration, and ability to handle complex work contribute more than mere rates. He said that in several deals where Forrester had access, it saw that the small providers often end up accepting work outside of their comfort zone to defend the current revenue in an account. Then they start building capability, resources, and often effectively pilot the first project at client cost. In the long run, these mid-tier players find themselves operating all over the technology map and end up with too many service lines for their size, he said. More Stories on : Software | Marketing Research
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