The great British obsession with haggling is a thing of the past when it comes to buying IT, says Birmingham based technology services provider, Probrand.
Shopping around by telephone and manually comparing price and availability for the best deal on IT is an outdated false economy says research program.
Private and public sector organisations are throwing away time and money; estimated at over 2.7BN of IT budgets, 61.2M in unneeded phone calls and over 1BN in wages related to wasted time IT managers are unnecessarily spending an average of 8 hours per week on managing IT procurement.
Proband has concluded that this is the cost of unstructured, inefficient procurement processes and a more strategic best practice approach to procurement from the boardroom down will help organisations maximise the bottom line.
As part of an ongoing research program into thousands of IT buying organisations, Probrand has found IT buyers are spending a minimum of 8 hours per week ringing round suppliers and manually comparing individual product price and availability.
Public sector organisations are calling a minimum of three suppliers in line with EU procurement guidelines, whilst in the private sector companies are calling anywhere between 1 and 10 suppliers, said Probrand Marketing Director Stephen Bushell. Many are now using internet web research as part of this process. In all cases vast amounts of time is being wasted on manual comparison before then using telephone negotiation to secure the best price and availability on the day. Organisations are throwing away an average of 10% of their IT budgets through unstructured buying, he concludes.
Previous research by theitindex.co.uk found that over 50% of IT managers surveyed stated that price and 79% stated availability were of high importance and time was spent conducting activity to that end. However, best price and availability were rarely achieved.
On that basis, over half of the UKs IT buyers are ringing round to negotiate on price, which equates to over 530M in mis-placed hours and phone costs whilst over are phoning round for best availability and quick delivery. This means the cost to UK businesses of securing best availability is in the order of 838M. This adds up to a large requisition-to-order cost.
The research has also unearthed that some organisations are paying up to 150% over the odds for their IT when in fixed price long term agreements as technology ages and cost prices decline over time. This means that organisations secure best value on no more than day one of the agreement.
Peter Robbins, MD of Probrand owners of e-procurement solution theitindex.co.uk, said: The IT market is highly dynamic and challenging for both buyers and sellers. Price, product spec, category and availability all change in realtime. But ringing round for prices and availability is perhaps the least equitable method of tackling these challenges as it is undoubtedly hitting the bottom line of UK organisations.
Put simply, employees will often spend a significant amount of time on the phone to suppliers exchanging social niceties before even getting to price and availability. Nine times out of ten they waste even more time haggling to get pennies off the price only to discover the product is on back order. Once they have done this several times they will conduct a manual price, availability and supplier comparison to find the best fit.
However, business is often based on relationships and if a buyer gets on with supplier A better than supplier B, even though supplier B has just offered the best price or availability, the likelihood is that supplier A will get the business. This entire unstructured process is inefficient and does nothing but cost the business as well as providing little or no spend analysis data for an FD or commercial manager to view how the IT budget is being spent. This leaves the door open to rogue purchasing amongst other wasteful practices.
John Oates, IT Advisory Partner with Chartered Accountants and Business Advisers, Baker Tilly, said Many organisations are inefficient in their approaches to procurement and this effects the bottom line.
It is well documented that one of the best ways of bringing IT spending under control is the use of e-procurement solutions, which structure and streamline internal processes while enhancing supplier relationships.
It is disappointing that so many organisations are still adopting unstructured approaches given the technology driven business world within which we operate. User friendly best practice best value solutions are more accessible now than ever before.
Research firm, Aberdeen Group, has reported that enterprises using e-procurement displayed a 35% improvement in spend under management, a 41% reduction in maverick spend, reduced requisition-to-order costs by 48% and cuts in transaction cycle time by half.
Robbins concludes: There is more to an e-procurement solution than cost savings; it is now a tool that removes manual error-prone repetitive tasks and promotes compliance with business controls allowing procurement resources to focus on strategic tasks for more equitable business.
About Probrand
Established in 1992, Probrand is a major supplier of top branded computer products - ranging from a floppy disk to a fully implemented network. Located in the heart of Birmingham, and employing more than 50 people, Probrand is a multi million pound corporation servicing a wide range of business customers throughout the UK.
The IT Index is an online trading hub and gathers prices and stock availability for more than 100,000 product lines from more than 1200 suppliers and conducts price and availability comparisons on a daily basis. The IT Index system then presents the most competitive price with stock availability on a customers Private Procurement Hub. This gives Probrand's customers who are signed up to The IT Index a bespoke catalogue of the IT products they use.
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