The following document is intended to provide some insight and background information on doing business in and with the public sector. This
information serves as an explanation about the way Crimestar software products are sold and why this approach is important to our company's strategy. We probably should not publish
this because clearly most of our competitors in the public safety software business have never done this kind of
analysis or research on the market in which they do business...|
Public agencies generally have strict procurement guidelines which must be followed for all major purchases. This process usually involves producing a Request For Proposal (RFP) which is published or distributed to potential vendors. Vendors are then asked to submit their response to the RFP in the form of a closed bid. The responses are then evaluated for their content and demonstrations of qualified proposals are scheduled. The results of these demonstrations are then evaluated to determine which product is best suited to meet the needs of the organization at the most competitive price. The intent of this process is to ensure a fair opportunity for all vendors, and to select the best and most cost effective solution to be purchased with public funds.
Some agencies publish a Request For Information (RFI), then
schedule demonstrations of products. The information obtained from the RFI process and the
demonstrations is then used to create the RFP document. The rational for doing this is to
be aware of what the market has to offer and to ensure that the RFP requests or stipulates
that certain capabilities must be included in the proposal. Bids are then accepted and
subsequent demonstrations may be scheduled before a final selection is made.
The Realities of Business
What many public sector personnel and agencies don't
realize is the business expense associated with this process. Preparing responses to an
RFI or RFP takes personnel time and subsequently costs companies money. Likewise
traveling to an
agency to perform one or more demonstrations or benchmark tests can often involve the cost of airline
travel, car rental, hotels, meals, equipment shipping and other expenses. Like
it or not, the cost of all these marketing
and sales expenses must somehow be recovered in the sale of the product or
services provided. Understandably, a vendor will
not win every competitive bid process they choose to participate in so often the costs
associated with several sales attempts must be absorbed by the sale which is successful.
The more steps that exist in the selection process, the more money it costs to compete for
the business and more expenses that need to be recovered by the vendor in the
form of product license and support fees and/or training and installation fees.
Congratulations Public Sector; your bureaucratic process has not saved you money
as intended, but rather has just significantly increased the costs of everything
you want to buy!
Common Misconception of Safety
A common dynamic in the public sector is the need for "security". We don't mean to insult anyone here, but, most people in the public sector are not risk takers. As a result of this inherent need to feel secure many agencies want to deal with a large monolithic corporation. These companies tout deep pockets, virtually infinite resources, and triple "A" bond ratings. While corporate stability has its place in the decision making process, one must realize that this sense of security may be more perceived than real.
Over the years a countless number of large corporations have entered the public safety software market, with big promises and grand dreams, only to abandon the market after realizing that doing business in this market is difficult and expensive. Most of these large companies do other things such as build airplanes or manufacture telephone equipment. While the representatives from the public safety division of such a company may be very sincere, ultimately the need to show profitability to corporate stockholders force these companies to abandon the public safety market to focus on more lucrative endeavors. If the big corporation you are doing business with abandons their public safety division, how secure are you? Any effort to litigate such a situation usually proves to be expensive and virtually non-productive so forget about it, your perception of "safety" is a fallacy!
Accompanying the false sense of security provided by the large corporate vendor, is usually a significant cost for operational overhead. The products offered by the larger corporations are not necessarily superior products, in fact often the large corporation simply enters into a "strategic partnership" with a smaller vendor for the purpose of responding to an RFP. In the final analysis most law enforcement agencies who can afford to do business with large corporations may often pay substantially more for the actual software products delivered, simply for the benefit of feeling secure. This additional cost is usually wrapped in value added services such as "Integration" and "Project Management" and other such soft services that are difficult to define and primarily designed to create the image that you are getting more value and therefore the additional cost is justified.
Understanding the realities of this situation and the history of the market is important to us as a small company. We often have to respond to questions concerning company size and stability. In this arena we do what we can to provide that needed feeling of safety to our customers.
However the most significant argument is to make potential customers understand that their is no real safety no matter who the vendor is. Even the largest of companies can (and have) turn their back on this market leaving their respective customers totally stranded.
Demographics of the Law Enforcement Market
If you were to look at the law enforcement market as a pyramid, it would be quite flat! The small agencies cover the broad base of the pyramid and as the size of the agencies increase the pyramid comes to a point rather quickly. According to the 2008 US Department of Justice statistics, their are approximately 17,985 state, county and local and special law enforcement agencies in the United States. The breakdown for local law enforcement jurisdictions is as follows:
It is easy to see that the greatest number of potential customers exist at the lower end of the market. In fact, over 87% of the local law enforcement agencies in the United States would be (in our view) classified as small because they serve a base population of less than 25,000 people. However most small law enforcement agencies, typically do not have the funding for items of substantial cost. The following table shows the typical operating expenditures for local law enforcement agencies. While these numbers do not include capital expenditures it is reasonable to conclude that available funding for capital expenditures is proportional to the general operating budget.
The Problem for Most of the Law Enforcement Market
Just because an agency is small does not mean that their purchasing process or requirements are any less stringent. Given the cost of doing business in the public sector it is understandable that many companies choose not to do business with small agencies because the cost of making sales in the lower end of the market usually exceed the revenue realized from the business.
For this reason most main stream public safety vendors focus their marketing and sales attention on the medium and large size agencies. However, with medium and large agencies representing significantly less than the median average number of agencies, most vendors compete for the business of a relatively small (small by number not by size) segment of the market. This leaves the largest segment of the market with little to choose from as they are viewed as too small to do business with.
The Resulting Strategy and Opportunity
Small agencies may not have big budgets, but their need for quality cost effective solutions is no less than their larger peers. Non-funded State and Federal mandated programs and reporting requirements are not waived just because your agency is small. Therefore the tools and equipment which assist in the process of day-to-day operations is just as important to the town of "Mayberry" as it is to New York City. However we still must remember the cost of doing business.
As the saying goes, "If you can't raise the bridge, lower the river". For Crimestar Corporation the solution to the problem and opportunity for success is a means by which the expense associated with the typical procurement cycle can be avoided. If the company has no debt then it is not constantly under pressure to engage in marketing efforts to produce "High-Income" sales. If marketing and sales expenses are minimized or virtually eliminated, then the product price can be significantly lowered as these typical procurement expenses no longer have to be absorbed by other successful sales. With a significantly lower price, a greater number of agencies at the lower end of the market can now afford the product. Likewise, with a lower product price the probability that a purchase would be below the threshold level of a local government's mandatory procurement or BID requirement is drastically increased. This means that with the formal bid process not required and a minimal purchase price the largest number of agencies are now positioned to purchase our product.
But the purchasing decision is not all about
price. It is more about value! After all, what good does it do
you to get a great (really low) price on a product that does not work or does
not meet your needs. Thus, before anyone purchases anything they generally
want to know what they are getting and if it will work for them. That's
typically why they ask for or require demonstrations etc. during the typical
However "canned" polished demonstrations can often be misleading to
the user and do not give the user the ability to truly see for themselves how
complete, intuitive and/or "user friendly" or workable a software product really is. For
that degree of understanding an confidence a user must go hands-on. Therefore it is important to make our products
(whenever possible) available to everyone for a free evaluation before they
make any purchasing decision.
This understanding of the law enforcement
marketplace combined with our philosophy and approach to the market lets
prospective Crimestar customers, see and experience for themselves the great
value that our software products represent!
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