B2B Extortion, the big company way

Big companies have big money, and that is especially apparent to small companies. Big companies know this and like to ‘lean’ on small companies. We all have war stories to tell of orders accepted under duress, to say the least.

Sometimes big companies take it farther and make up their own rules to suit their interests. Today is just such a day for our company, and I wanted to tell you about it.

A large aerospace/electronics customer of ours has decided to outsource vendor qualification and maintenance, especially for on-site contract services.  The amount of service work we do with this company is minimal (I’d guess 5-10 calls a year), as we only install and/or maintain what we manufacture. Over the years we’ve had to have our technicians take safety classes, or drug tests before they can work in a facility. It’s a pain, but we comply.

Now this third party steps in to keep track of insurance, certifications, and compliance to their rules. One might say it is some perversion of a union. And what do unions need to run? Dues.

Yes we have to pay this third party for the privilege of servicing our equipment at our customer’s site. Not to mention all the hoops they have for certifying us, as well. How much do we have to pay? $3,500 a year, plus $500 set-up fee. The fee is based on the size of our company, and not the amount of business we do with the customer.

Are you kidding me? This third party benefits the ‘hiring company’, not us, the ‘hirees’, yet we are the ones who have to pay.  Especially for us, while the equipment we sell may justify the initial $4K fee, the actual contract service work we do cannot. And if they expect us to do all the service work while they keep the equipment for ten years, the fees will add up significantly.

Honestly, if it wasn’t for the onerous fee, I might think this was a helpful ‘web 2.0′ service to streamline everything (their website even looks 2.0-ish). But the third party gave the big company the price of ‘free’ and pushed the cost to us poor schmucks who need the big company’s business.

Our salesperson is going to plead our case with the purchasing person enforcing this service. I’m sure she’s heard the whining before and won’t be able to do anything about it anyway.

 

  • http://www.dadiehost.com/ Dadie Host

    This brilliant must-read article provides the key to the Big companies,
    Guess 5-10 calls, Small companies & Large aerospace/electronics
    customer. Dave J. you raise a powerful antidote to today’s malaise and
    pessimism.