Business & Finance
Commentary
9/26/2003
06:31 PM
Stephanie Stahl
Stephanie Stahl
Commentary
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Editor's Note: Raise Confidence, But Not Prices

Confidence is up, the high-est it's been in a year, according to our Confidence Index. Researchers are forecasting a comeback in the chip sector, consumer spending is strong, and news of acquisitions is becoming more plentiful. But here's how we know there really is a recovery taking place. It's the try-to-squeeze-in-a-price-increase factor.

It was only months ago that CIOs said they were thrilled at the deals they were able to get. It's true that these business-technology managers have been doing more with less, but they've also been able to buy more with less thanks to some significant price breaks and flexible licensing terms from a vendor community looking to increase market share. But at last week's InformationWeek Fall Conference, Rich Hoffman, CIO of Hyundai Motor America, asked: How many people are finding their IT vendors trying to slip in surprise increases for maintenance, licensing, or other services? A bunch of hands shot up, and heads nodded.

IT vendors may be pushing back at this buyer's market, and it's a source of frustration to the buying community. One software vendor tried to tack on a 20% price increase, Rich said, but "I can't charge 20% more for a car." His reaction: "I challenged [the vendor's sales person] to bring his CEO in to meet with my CEO to explain his price increases." He hasn't taken Rich up on the offer yet, though.

On Rich's priority list is an aggressive goal to increase annual car sales threefold by 2010. That amounts to a total of about 1 million cars per year. That's on an IT budget that's lower than the industry average, he says. Don't expect the company to go on an IT spending spree. Instead, it will focus on a few vital IT projects, including data warehousing, security, integrated voice response, and Web tools.

Stephanie Stahl
Editor
sstahl@cmp.com

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