Since I’m traveling this week and not likely to post much, I’ve scheduled some entries like this to point to some of my personal favorite blog writings.
Here’s today’s blog blast from the past.
Title: “Avoid the single supplier document taxes”
Date: February 28, 2007
When customers are restricted to a single supplier for anything, they pay taxes. The first tax is the difference between what they must pay to that supplier vs. the theoretical cost to them if multiple suppliers existed and prices had to be competitive and lower. This is real money, and small and medium size businesses are especially vulnerable because they often lack the negotiating leverage to get suitable volume discounts.
Customers also pay an innovation tax. When the single supplier only improves the product enough to maintain income from product version upgrades, customers miss out on the competition between suppliers between who can create better products with genuinely useful and new features. The sole vendor has limited reasons to improve the product. Fresh ideas from new players are kept out of the product category. This is bad.