You Get What You Pay For

That gets at another impediment to innovation and one that's squarely in the customer's control: price tolerance.

"Providers may be able to come up with new offerings that provide innovation, but at what price?" says Trowbridge. "They may come up with great ideas but if the price point is off, CIOs won't buy it."

CIOs may not start off looking for the lowest price; they may have big ideas about transformation and innovation. But somehow, as they move from RFP to final selection, price almost always becomes paramount.

"First there's talk about how we'll be partnered forever," says NOA's Kobayashi-Hillary. "But once you get to the final stages of the RFP and the only people left in the room are those competent enough to handle the job, it comes down to price."

Trowbridge ascribes this process to human nature: "People like watching the vendor grovel and getting them to come down in price. The client deal team comes back and everyone congratulates them on how they kicked the vendor's butt." But negotiating the vendor out of a profit helps no one. Says Trowbridge: "You get what you pay for."

In 2003, Fluor signed a $US351 million, seven-year contract with IBM Global Services, one of Big Blue's hallmark On Demand deals that year. In a press release, IBM said the deal would result in "substantial cost savings to Fluor . . . the streamlining of numerous core work processes . . . and flexible usage-based pricing that enables Fluor to access computing resources as needed to support growing businesses."

How'd that work out?

It didn't.