The Disconnect Continues


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The relationships between the people who buy digital content and those who sell it are probably more acrimonious than ever before, says Dick Curtis, a director and lead analyst for the research firm Outsell Inc., where he covers econtent contract and negotiation strategies.

Several buyers agree with his observation. They cite aggressive sales tactics, an unwillingness to deliver content in formats buyers need, a reluctance to provide licensing terms that take into account the structure of today's corporations, and inadequate service and support as a few of the factors underlying the acrimony.

Still, many buyers remain optimistic that compromises can be reached on some of these issues. But first, they say, sellers must truly understand the econtent needs of today's enterprises.

The Need For Global Licensing
"Buyers have a larger awareness of their total corporate needs," Curtis says, "and the vendors—in some instances, not all—have not kept pace with that development and refuse to consider contracts on a global basis. So the buyers have become more and more frustrated."

Cindy Hill, manager of the SunLibraries at Sun Microsystems, says contract negotiations are taking more time than they used to because "the vendors are not hearing that we have a global impact. They're looking at site licenses or geography-based licenses, and that is immaterial to us nowadays. Our employees are anywhere, anytime. They're not geography bound. IP licensing and site licensing and the number of seats are just immaterial. When we try to explain that to the vendors, they're just not catching on. They continue to ask, 'How many sites are you signing up for?' Well, I don't know. Do we count every employ's home as a site? Many of them now work from home, and vendors seem confused by that."

"I have some of my own staff at home," says Bob Schwarzwalder, manager of Library Systems and Information Research at Ford Motor Company. "I have them on the road. And if you look at the number of executives who travel and use information all over globe, the idea that people always sit down at their desk to do their work is nonsense.

"Also when you start to look at the evolving structure of the corporate Net, especially in relation to the extranets and the whole nexus of business partners involved—the tier-one suppliers who work with us in design—trying to deal with issues like that with information suppliers is very difficult, but that is the way today's corporation works. Ultimately, people who sell information will have to deal with that, but now you can't even begin to speak to those kinds of issues with most suppliers."

How Many Users?
"There are instances where I feel like vendors are unrealistic," says Lee Dirks, group manager of Information Services for the Microsoft Knowledge Network Group. "When they walk in and say, 'You have X many employees in your company, and that is the potential market for our content,' I tell them no, maybe an eighth of that or a tenth of that population actually has real potential for using their product, but they still want to base their pricing on the total number of employees."

Barb Peterson and Kristin Oberts, information professionals at 3M, say they face a similar problem. "We have 70,000 employees worldwide," notes Oberts, the Library and Information Services manager responsible for licensing content, "but for any particular product we purchase, there's probably anywhere from a handful of people to maybe as many as a 1,000 who would use it. So we try to convince suppliers that although we offer open access globally, 70,000 people are not going to use it, and they can't price it that way."

"With companies that are willing to deal," says Peterson, 3M director of Library and Information Services, "we're able to say, Let's start someplace. Let's use a benchmark, and if we're way off or they're way off, we'll come back and regroup in a year. But let's not start at 70,000 users or even 10,000. Let's start at a 1,000 or 500 and see how use develops."

Technological Concerns
Are econtent vendors supplying technology that meets buyers' needs? "They're not building for both of the two main platforms," Hill notes. "They're choosing one over the other, so it could be that they're primarily in the NT world or they're primarily in the UNIX world, and I'm sure that the NT-dependent people are feeling the same pain points we do."

"Content should not be platform-dependent," she adds. "That should not be a decision criteria, but we're seeing far too many products designed on one platform, and they have no intention of transferring it over, or when they do, it's not robust. That's just wiping out big chunks of market for them."

Schwarzwalder says he often has asked vendors to supply products not as discrete, branded units, but as information that can be easily integrated into larger systems. "We've developed and purchased better tools for doing that integration," he says, "but that has gotten to be a hard sell with the vendors. So I think that has been an issue that has not been resolved, and I don't think a lot of people selling information truly understand what I'm asking for."

Hill says she also has been asking for easier integration: "I've been at Sun six years, and that has been something that we have been talking to the vendors about every single year. We ask, 'What can we buy that's independent of an entire package?' or 'How can we provide a single source for all these resources?' We've actually experimented a couple of times, and we're coming up with a third experiment involving vendors allowing us to link their resources together, but it's just amazing how they don't want to do it."

"The more ways content can be linked through various interfaces, the better off the supplier is going to be and the better off our clients will be," notes Oberts at 3M. "So we look for suppliers that have a pretty strong technology base and technical support that can make their content richer and more readily available in a variety of packages."

Microsoft uses a custom approach to solve some of the integration problems. "Two years ago we had subscriptions to several news databases, but an end-user inside the company could not search across them," notes Dirks. "So the model we've moved to internally is trying to bring content from multiple vendors inside the firewall in XML, where possible, and pulling targeted information out of the databases. We pull it inside, do our own crawls, and use the results to automatically populate our Web pages. For instance, a person could come to our Web site and type in 'telecom,' and it will generate a dynamic page that is pulling the most relevant news from a variety of databases."

"We've been asking for XML feeds for two-and-a-half to three years," he says, "and we're finally getting them from about three vendors now. Of course, we want XML feeds from 100 percent of our vendors, and many of them finally are coming around."

Pricing Points
"Pricing is clearly another important issue," Outsell's Curtis says. "There's a fair amount of pressure in the economy right now. A lot of companies are cutting their budgets. At the same time, some vendors are raising prices. I'm not going to quibble over the fact that it may cost vendors more to produce their products, but sometimes they're raising prices more than the cost of production has been increasing."

"There's a lot of mystery about how prices are arrived at among vendors," he adds. "There's very little published information, and that has a lot of the buyers wondering, 'Am I getting a fair price? You tell me I'm getting the best price of anybody, but am I really?'"

Hill says, "One thing that's a little bit frustrating is that we've known for the last eighteen months that business is difficult, but we don't see the vendors responding to that. Their prices are as high or higher than they were eighteen months ago, so, of course, we have to buy less, and that makes the vendors upset because they're not getting the revenue, but we're not seeing any compromises or acknowledgement that this is a tough time for everybody right now.

"It's also kind of interesting that they're not interested yet in doing shorter term contracts, maybe six months, so at least they get some money, and we get some use out of it. They're not looking at alternative ways of doing business."

She adds, "Some of the analyst organizations believe their content is highly valuable, and they're pricing it that way, and we're telling them no, it's not. It's not timely. It's not necessarily accurate. And there isn't much meat to it. When we start to actually tear apart how they got the data, it's not robust enough for us to really base decisions on. So we don't think it's worth their pricing. We actually have people on our evaluation team that, throughout the year, are analyzing the numbers coming out of the market research reports. We actually recalculate them."

Other Issues
"Another area I think is of increasing concern is service and support after the sale," Curtis says. "Someone buys a service and expects certain things to come along with it. They expect to have a help line or the availability of analysts, or they expect information to be delivered electronically every morning before 8:00 or whatever the schedule is. When that doesn't happen and there's not a backup plan, buyers tend to get a little upset."

Another concern to many buyers is the disappearance of both established and new vendors and resources from the market. "As organizations like ours become dependent on that information and it disappears, there's a void," says Hill, "and we don't know how to fill it."

"We've had a couple of companies that we were interested in go under," notes Dirks at Microsoft. "One company we had just signed a contract with went under. Luckily, it was a small company and we had a small contract, but we have to be careful in this current environment. We've had many companies give us sales pitches and say, 'Bet your business with us.' We've said to them, 'How many other large enterprise engagements do you have?" and they say, 'You'd be the first.' I tell them, 'Sorry, I can't do that. I need to see experience. I'm not in a risk-taking mode these days.' We might have been a year-and-a-half or two years ago. We're absolutely not now. We have to go with successful players with proven track records."

"An issue from the vendor's side is the whole area of rights management," Curtis notes. "They want to know how well the buyers protect their intellectual capital. How do they keep it from being illegally copied and forwarded?"

Dirks says rights management and related tasks at Microsoft are taking much more time than they used to. "We have security controls in place so only certain users can access certain information, and that's an immense headache. But I think that's only fair. If we sign a contract with a vendor saying only 1,000 or 2,000 people in our company are going to be using their service, then the onus is on us to be able to demonstrate that. But this frequently involves technical solutions and a great deal of administrative overhead that is not always practical for every organization."

Another concern to both buyers and sellers is "the whole issue of contract language," Curtis notes. "It's not something major buyers should worry about, but too many times in large corporations, the contracts and purchase orders are written by somebody used to buying pencils and chairs and computers. They don't understand buying intellectual capital, and it takes a different set of words and a different approach to get that right."

Reasons For Hope
Everyone interviewed for this article points out that although the number of vendors who are difficult to work with seems to be increasing, there still are several companies willing to deal and responsive to customer needs.

As Dirk says, "Of course, there are many vendors we've had successful, positive negotiations with. Obviously, we would have liked the products cheaper, and they would have liked them more expensive. Still, in the end, we've walked away with a good relationship."

Hill at Sun says she is hopeful relationships between buyers and the sellers who are difficult to work with will improve during the next year or so: "Being an optimist, I really am hoping they do get better. I don't know how they will, but I'm expecting them to. I suspect the vendors are just as frustrated as the buyers, and they also are trying to figure out solutions to make their relationships easier and smoother. Since both of us are feeling this pain, I think we'll start reaching more agreements on a case-by-case basis. That's my optimistic viewpoint."


SIDEBAR: Bad Reps for Sales Reps?
Many econtent buyers say they're encountering problems with sales representatives more than they used to. For example, Cindy Hill at Sun Microsystems says she believes there is a large number of inexperienced people working the market now.

"They are just selling," she says. "They're not providing a solution perspective. Their approach is 'Here's our price list. What works best for you?' instead of 'Let me hear what your situation is, and let me see if our product and our model is a viable solution.' I'm not getting the sense of expertise and focus from the sales reps I used to get."

"My experience is that often the people who do the selling are not necessarily listened to very well back in the main office," says Bob Schwarzwalder at Ford. "I've made deals before where I had to go beyond the salesperson and work with the CEO and express directly my concern that I wanted to buy from them—but not exactly what they were selling—and I couldn't quite get anyone to deal with me on the key issues of the format of the product or the licensing or the integration.

"What's interesting is that a lot of time when I've dealt at the higher levels of an organization people say, 'Well, of course, we'll do this,' but the salesperson cannot get those issues addressed. I've encountered that several times. Perhaps when the salesperson goes back and says, 'They would have purchase except …,' that's heard as just an excuse for not making the deal. I don't know, but I'm seeing that more often than not: The salesperson is not the one to change the terms and conditions."

Outsell analyst Dick Curtis raises another issue. "Some buyers who deal with analysts who report on their industry are being pressured to buy certain information in order to obtain favorable reports," he says. "This is the same thing Wall Street has been complaining about recently, but we also see definite evidence of it in the information industry."

"We recognize there may be that game out there," notes Hill, "but we've made it clear we're not going to participate. We have spoken to our senior sales reps and let them know we are not buying their content for that purpose."

"It's very clear that information suppliers are scrambling," says Kristin Oberts, who licenses content for 3M. "Because of that contract negotiations are more challenging. I had five to ten vendor calls a day last December. It's very obvious that there's some desperation in the marketplace right now and an urgency to make a sale."

Barb Peterson, 3M library director adds, "While they're pushing for sales, they need to remember to meet our requirements and understand our need for various information may be different than another company's. Both parties need to be flexible, willing to listen, and willing to negotiate for us to develop a successful partnership."