Supply Excellence — Top 5 Categories to Source Now: #1 IT

Top 5 Categories to Source Now: #1 IT

July 21st, 2008 · by Justin Fogarty · No Comments · best practices, supply management

Well we’ve finally reached the final spot on our countdown. Just to recap, so far our coverage of the SIG Top 5 Categories to Source Now webinar has broken down #5 Direct Materials, #4 Travel Management, #3 Transportation and #2 Temporary Labor. That leaves us with the much awaited top spot, and that award goes to … IT (PCs, workstations and servers).

Unlike Casey Kasem, I won’t launch into a long, tear jerking story about the hard times professionals have had to endure procuring IT and why it’s such a special moment for hardware to claim the prize of top sourcing opportunity. No, I can’t imagine anyone whose professional life didn’t involve an outdated laptop you wanted “accidentally” back over with your car, a desperate need for a new server in order to do your job or some other painful struggle to upgrade your IT into the modern era.

The good news - as Category Manager Justin Falgione explained in the webinar - is that now is a good time for companies to source IT for a number of reasons. Justin quoted some surprisingly strong growth projections (12% in ‘08-09) for PCs. Combined with the “refresh cycle” that’s expected to begin later this year and continue through 2010, and market conditions are right for buyers. Why?

Competition Among OEMs - The OEMs are looking to expand on their internet sales with a strong push through channel partners. Additional options and increased competition are great for buyers.
Cut Hardware Price, Up-sell Services - As suppliers try to differentiate themselves AND gain marketshare, they’ll look to cut price to earn your business…then up-sell additional services and add-ons (warranties, disposal, green issues, configuration, etc.). Depending on your company’s needs, you may be able to get your hardware for a reduced costs OR work those services into your negotiations as well.
Pricing - Increasing efficiency in the products, supply chain and operations have continued to push prices down (although Justin did warn of price pressures caused by new Chinese labor laws, transportation costs and the declining US$).

Perhaps the current opportunity in this category means it’s time to look beyond simply operating IT procurement in a reactionary, maintenance mode and consider some broader strategic initiatives. For example, many companies have been slow to migrate to the new Microsoft Vista operating system. But if you’re eventually going to move to the new OS, wouldn’t it make sense to do so at a time when you could leverage your purchase for either lower prices or increased support for the upgrade?

Justin Fogarty is Managing Editor of Supply Excellence. Questions or feedback about the blog or any of its contributors can be directed to Justin at jfogarty[at]ariba.com.

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