Thursday, June 4. 2009Exetel - Too "Cheap" To Be Considered......John Linton ....at least by some business users. I talked to the Financial Controller of a prospective business customer earlier this evening who was considering asking Exetel to bid for their busness in the new financial year as we had been suggested by their MIS manager who uses Exetel at home and who has recommended Exetel to over 40 current personnel within the prospective customer's company (including by the financial controller who said the Exetel ADSL1 service hadn't "missed a beat" in the three years he has had it). The company has a largish branch office network with over 20 locations and they do some high volume file transfers between the offices - often more the a gigabyte per file and sometimes up to 50 gigabytes as well as the usual secure email and intranet uses. They currently use one of the very large carrier's infrastructures resold to them by a highly regarded 'systems integrator'. The purpose of the call from the company's FC (with whom I've been acquainted on and off for a very long time) was to seek clarification of his MIS manager's estimate of the possible savings the company could make by replacing their current network links with links from Exetel which his MIS manager had priced from our web site as a rough guide to what savings might be achieved if they were to change providers. If the rough estimate was correct the possible savings had been calculated as being around 80% per month - reducing their current monthy spend from a little under $A50,000 a month to something around $A8,000 a month. I couldn't really make any sensible comment other than to confirm the monthly cost of several different 'sized' links as being correctly read from our business web site which was all that was being sought. We had a pleasant conversation with a negative outcome in that we agreed that Exetel was not the sort of provider that his company should seriously consider and that it would be a waste of both companies time if we were to be asked to tender for the business - because we were "just too cheap". We also weren't "professional" in publishing our pricing on a web site ("none of the major companies do") because "business networking is much too complex to be able to be costed simplistically unlike residential services"..... and, for the record, I'm sure those comments were not made with any intention of being offensive and I certainly didn't regard them as offensive in any way. I ended the conversation as soon as I politely could and wished him every success with his forthcoming tender. I think we would have liked to bid for the business (and truthfully a 22 or so link star network is hardly rocket science in 2009 even for a "cheap provider") but perception in many decision makers is everything and it was absolutely the correct thing to do not to waste the time asking a supplier to bid for your business when you know you will not seriously consider them. I have heard the comment made several times that by pricing our services so inexpensively we give the impression that there must be key elements missing that "the larger professional network providers" deliver which accounts for the price differences. Perhaps these 'larger' network providers do incorporate other elements in their pricing that Exetel don't - though I have no idea what such elements might be other than massive mark ups and their fat and unnecessary sales and management structures. Then again I am obviously too inexperienced in selling, managing and supporting network services to really understand what I'm talking about. I never know whether the people talking to me in these terms realise the irony in what they say. After all, I am a key decision maker in selecting the suppliers of a network infrastructure that supports around 100,000 users and I play some part in selecting the personnel who manage the ongoing supply of those services 24 x 7 x 365 and have a very, very key interest in those services being delivered at the highest possible levels of up time and at the lowest possible costs consistent with delivering the reliability and consistency. In my capacity as a buyer of the 'components' that are needed to operate an Australia wide network I am probably better qualified in terms of understanding the real cost vs reliability trade offs and the day by day changes in the pricing of all network components than any buyer below the $A3,000,000 per month that Exetel spends on network services every month. But apparently not in the eyes of the people who tell me about their need for "safety" and their need for "reliabiity". Do they really think I don't have to take those factors in to consideration in deploying Exetel's network infrastructures? It does pose a significant challege for us though as we attempt to quadruple our business user base over the coming 12 months - the simplest of all challenges - how high do we mark up our sales prices so we aren't perceived as "cheap" and therefore somehow "deficient" in the "content" of the services we offer but low enough to retain a competitive advantage and to continue to meet the objectives we set for Exetel back in December 2003. I have been thinking about this issue (admittedly not particularly hard) for some three or four months and as I slowly and very reluctantly turn my mind to "marketing" and "promotion" and away from simplicity, clarity and common sense. My current view is to cheat the customer the same way so many other communications providers do and play games with the pricing by raising the price from our current levels to something like the same as one of the most expensive providers but then offer every second month "free" or the first 6 months "free" on a 24 month contract. Alternatively I suppose I am going to have to become a "professional" and work out what all the expensive elements I have left out of the current services that makes them so "cheap". (though after so many decades of selling IT services I think it's almost certainly too late to aspire to the "professional standards" of our competitors). PS: and on the subject of irony - the last 'request' from the company before the conversation ended was a request to lower the prices of our employee plans as "in these difficult times" every employee of this particular company had just had their salaries frozen for the coming financial year and it would be a help!. Trackbacks
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Geeze I hope he somehow anonomously gets sent this blog entry....
How about you quadruple your pricing and offer all their current employee's that use Exetel free ADSL2+ for the length of the business contract? Comment (1)
Would it be possible to allay such fears in potential business customers by offering to include compensation clauses for downtime? Or would you consider such a move be too risky? Just a thought.
Comment (1)
Business circuits come with SLAs.
I think the real problem is simply that the people who assign the budgets want an easy life and as it isn't their personal money they look to large organisations and/or systems integrators to hold their hands and make up for their ow and their sysadmin's knowledge and skill shortfalls. I could well be wrong. Comments (5)
Sounds like you need a document that specifies every 'corporate' feature of your network in point form and what differentiates you from other providers in the marketplace.
For me, the QoS capabilities with your accelerator boxes and the way you give priority to business traffic should be a major sales feature over the majority of your supppliers. Also, if you talk to TPG, for instance, they seem to use the fact they don't oversubscribe their business bandwidth at all. Comment (1)
You are quite right and we do the point by point thing in the proposal.
It's been a very long time since any business connection was anything but 'pure bandwidth' - TPG are living in David Teoh's past of massive over subscription if they still think its worthwhile to claim they no longer do it. Comments (5)
I think your pricing is good.
Just wish my sites had a choice other than Telstra. Comment (1)
Maybe if you put some "free" hosting into the mix for business customers??
H. Comments (2)
John,
I seriously worry about people that are concerned that they are charged too little in relation to what they are currently paying. Are these people really examining all viable options or are they just giving the nod to those companies that will, give them some form of kickback. I don’t know, but are kickbacks to those with decision making power part of the industry..... I know, and you know, Exetel is an A class supplier -- is their and old boy kickback system in place -- where those are part of some convoluted system making money by recommending a certain supplier should get business and gives them some personal advantage. Comment (1)
John,
you have talked before about similar problems with potential customers. Perhaps what they are trying to say is "I would like to use your product, but it is different to what we are using at the moment". I need to protect my butt in case things go wrong; because nobody ever got fired for using IBM, Microsoft, or the established providers. To allay his fears, tell him to look up Exetel on whirlpool.net.au. ; or get a minion to do it. Quote him a price midway between what he is paying now and your price on the web. Tell him you will have somebody on call in Australia 24/7to deal with any problems. Inform him of the negotiations you have made to secure good prices/ reliable equipment. If you have a reasonable sized company on your books, see if they will recommend you. Pete Comment (1)
"... I need to protect my butt in case things go wrong; because nobody ever got fired for using IBM, Microsoft, or the established providers."
I have seen this a lot over the years. .... in many industries.... and with many products. ... and particularly where large companies are concerned... ... it seems that there are many "managers" who are not prepared to be "innovators" or "to try something different" - just in case their future employment prospects will be affected. ... but they are usually prepared to consider "new" things, if it can be demonstrated that somebody else has already tried it successfully. ... sometimes, even if it is in a different industry. H. Comments (2)
Too Cheap!!!
Very amusing post. As a long time user of Exetel i enjoy reading your musings. Kind Regards Andrew Comment (1)
""... I need to protect my butt in case things go wrong; because nobody ever got fired for using IBM, Microsoft, or the established providers."
... it seems that there are many "managers" who are not prepared to be "innovators" or "to try something different" - just in case their future employment prospects will be affected. ... but they are usually prepared to consider "new" things, if it can be demonstrated that somebody else has already tried it successfully." Having spent 20yrs in local govt I can assure you that almost every tender or proposal or even a sales enquiry is followed by the council officer asking "What other councils do you have on your books?" Maybe it is worth asking a couple of your long-term customers whether they'd be prepared to act as referees, either for quoting in your submissions/tenders or at least via a logo on your website's business pages ... "Exetel customers include ...", with appropriate wording selected so that you are stating a fact and not offering an opinion on their behalf ("Exetel customers include ..." would do this nicely). Comment (1)
If they can afford something that is 4x the price of yours why can't they have both? That way they have security of their existing provider while they can trial Exetel services.
Comment (1)
..because of the no fail reliability you get by paying 5 times as much for the same circuit?
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