When a market comes to perceive that there are numerous potential suppliers of
similar products, the product then becomes a commodity. The only way to
differentiate between commodities is price. One could maintain that price is not an
issue in the provision of internal IT services. There in the catalogue, is what we
charge for a computer and its connection to the corporate network Mr User – your
options are to pay that price or go back to pen and paper. And the helpdesk doesn’t
charge for its services, nor does applications maintenance charge for bug fixes
and forms redesign, so how could price be an issue?
When it’s not a matter of money, other factors come into play. Part of the cost of an
IT service comes from its availability. How much effort is required on the user’s part
to avail himself of the service? He will avoid that effort as much as he would any
avoidable cost. So to the user at least, the competition is real. Which is the
cheapest way, not just financially, but also in terms of my time, to get this service?
One option is IT services – another is to go outside, ask a friend, fetch in a
contractor, whatever. Because at least some of what IT services provides could be
construed as a commodity provision.
There are two ways to deal with competition. One is to remove it from the
marketplace by a takeover. I’ve seen this done – in a company that used several
vertical applications in addition to its standard, horizontal office software. The
specialized software and associated support were provided by external parties,
often trading directly with specific groups of users. In some cases, the only thing
IT services knew about these was that they existed and servers had to be provided
to house them. But the service manager had other ideas. He knew that his
department was not the only group providing some form of IT support to the users,
and that the standards of those alternative support offerings varied enormously.
So he determined to set an overall standard for IT product and service provision to
the corporation’s users, regardless of source. He then made that insistence on
these external companies and took full responsibility for their performance. In
effect, he acquired those external provisions because in terms of service quality
they must report not to the users who engaged them, but to the IT services
department.
The other way to tackle competition is to defeat it by adding value to our own
provision. If the user sees his request as being satisfied solely by the provision of
a hard product or solution to his enquiry, then that licenses him to seek alternative
providers of that product or solution. But our response should be to take the focus
away from the hard end-product – to make the user value it not for what it is, but
for what it means