You're In The Wrong Business If You're Upset That Your Supplier Is More Efficient
Date : 02 22 2008 Category : Business
Techdirt
Saul Hansell at the NY Times has an interesting blog post about how various value added resellers (VARs) of Postini's anti-spam email solutions are upset at Postini's new parent company, Google, for drastically cutting the prices on Postini's offerings. Basically, they're upset that it's much more difficult for them to make a profit, and also because Google can now more efficiently service smaller customers, who Postini used to ignore, leaving them to the VARs. So, instead, these VARs are dropping Postini and looking for competitive vendors. Hansell even wonders if Google will be forced to raise the price just to keep the VARs happy.
My guess is that Google honestly couldn't care much less about what the VARs want. It seems to believe that the service was priced artificially high in the first place, and the company can do much better dropping the price and making the offering much more widely available. If VARs can't handle that, that's not Google's problem. What's more interesting, though, is this idea that VARs now think the solution is to go to a more expensive Postini competitor. Sure, it may seem like a better way to get the necessary margins, but eventually those efficiencies come home to roost, and customers will begin asking why they should pay so much to the VAR when they can just go direct to Google and buy Postini for a tiny fraction of the cost. If your supplier is much more efficient and can drop the price of something supplied, the answer should never be to drop them and sign up with a much more expensive supplier. You may fool some of your customers for a short period of time, but it's a losing long term bet.
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My guess is that Google honestly couldn't care much less about what the VARs want. It seems to believe that the service was priced artificially high in the first place, and the company can do much better dropping the price and making the offering much more widely available. If VARs can't handle that, that's not Google's problem. What's more interesting, though, is this idea that VARs now think the solution is to go to a more expensive Postini competitor. Sure, it may seem like a better way to get the necessary margins, but eventually those efficiencies come home to roost, and customers will begin asking why they should pay so much to the VAR when they can just go direct to Google and buy Postini for a tiny fraction of the cost. If your supplier is much more efficient and can drop the price of something supplied, the answer should never be to drop them and sign up with a much more expensive supplier. You may fool some of your customers for a short period of time, but it's a losing long term bet.
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