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Verizon Vs. Technology Suppliers

Shaygan Kheradpir, Verizon's chief technology officer is doing everything he can to squeeze his suppliers so he can reduce his company's technology costs.

Consultants have been fired, saving $50 million.

Large computer purchases have been curtailed, lopping off $120 million over the past two years. But these savings weren't enough.

Mr. Kheradpir wanted more.

He set his sights on IBM, Hewlett-Packard, Sun Microsystems, and the other technology companies that sell hardware and software to Verizon.

From Mr. Kheradpir's perspective, corporate computers are becoming more like commodities. With wider adoption of software standards, the machines are more interchangeable, making it easier for buyers like Mr. Kheradpir to play one manufacturer against another.

And it worked for him... BIG TIME!

He told Sun, H-P and IBM that their share of Verizon's spending would depend on how low their prices were.

All three immediately lowered their prices by 25 percent.

Sun and HP also slashed maintenance charges.

Sun went further, offering to provide software for Verizon's planned development of another major service.

In the end, Sun increased its share of the shrunken $2 billion budget. HP also gained, while IBM lost ground.

What Can We Learn?

The most important thing that I learned from reading these articles is that when the only issue your customer is concerned about is price, you can only lose.

As a supplier, you'll get skinned alive.

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February 2005