Early involvement leads to successful technology buy

By Staff -- Purchasing, 3/22/2001

Early involvement of purchasing in a corporation's buying process for computers, peripherals and software "improves strategy, source selection and negotiation," says Pamela E. Nullmeyer, procurement manager, Raytheon Technical Services Co., Long Beach, Calif.

Nullmeyer is far from alone in her thinking. "Contract negotiations start way back in conceptual form," says Donald Anderson, purchasing manager, Remington Arms Co. Inc., Ilion, N.Y. "Unless purchasing is involved up front we will not have an impact on savings that could be achieved. Once price and delivery are set, purchasing has no impact after the fact.

Eighty percent of corporate buyers responding to a new PURCHASING Magazine readership survey are involved in the technology sourcing process at their companies. What's more, 67% of these purchasing managers say their responsibilities as technology buyers have grown over the past three years.

Seventy-four percent of respondents who indicate they are responsible for the technology buy say their involvement includes negotiating the agreement; 60% are responsible for selecting the supplier; and 49% manage the contract. (Most respondents indicate they are involved in all three of the purchasing activities.)

In tandem with IT

One respondent who requested anonymity lists his technology purchasing responsibilities as being "part of a team for supplier selection and negotiation. The team determines qualitative and quantitative criteria used in a strategic alliance." Another respondent, Brian Skopp of New York's Park Central Hotel, says that as director of purchasing he "specifies for all equipment, negotiates with suppliers, and assists in contract management and brand specifications."

Otherwise, "too many departments involved in the process slows it down," says Skopp. "Specifications are based on actual needs, not wants. Wants tend to end up costing more. Purchasing is supposed to get you what you need only, thus hopefully staying within or below budget guidelines."

It's important to top management at companies like the Park Central Hotel and others that purchase large volumes of technology goods and services to have purchasing input in the sourcing process. Skill at developing a statement of work (SOW), negotiating agreements, controlling costs, and managing relationships with suppliers is what the function lends to the process. A majority says that purchasing expertise is essential, in the words of one respondent, "to obtain best overall value and secure favorable terms and conditions."

An impartial eye

For Caldwell Manufacturing Co., Rochester, N.Y., purchasing involvement in the technology buy "keeps the focus on quality, price and delivery, not just on being the newest technology," says Ted Boucher, vice president, purchasing and information systems.

"IT professionals are trained to specify and select specific hardware, software and possibly supplies," agrees Gary Michalkiewicz, purchasing manager, Duralam Inc., Appleton, Wis. "But, just like other departments, they do not know how to buy these items. Technology items can vary in price, warranty service, etc. from supplier to supplier of the same products."

That's precisely why purchasing is on the technology acquisition team at Precision Valve Corp., Yonkers, N.Y. "Purchasing's role is to review proposals based on deliverables and to assure that there is a way of measuring results," says Ed Gunther, director of North American purchasing/coordinator of global procurement. Adds a buyer who requested anonymity, "That an impartial eye reviews suppliers, and multiple sources bid on requirements."

And purchasing is involved at the HDJ Co. Inc., Lancaster, Pa., "To maintain consistency in product, price and service," says James Walsh, purchasing manager.

"Price! PCs have become commodities, and cost has become a big factor in decisions," is reasoning Magellan Health Services, Maryland Heights, Md., uses for asking corporate buyers to lend their skill to the technology sourcing process. Says Michael J. Roth, "As component prices continue to drop, a good purchasing department is able to translate that into either better prices or upgraded units."

A stake in the decision

As more and more companies see the value of purchasing input in the technology acquisition process, a growing number of corporate buyers are finding that they now are working more closely with their company's information technology managers. In fact, the technology purchase is a team buy at a majority (90%) of respondent's companies. In addition to IT, end-user departments, finance and management all are called to lend their expertise to the process.

"Management believes that input from each department is crucial to obtaining the most beneficial data systems possible," says J. Nate Wilson, Jr., director of purchasing, Pioneer Housing Systems Inc., Fitzgerald, Ga. "Within our organization, purchasing works very closely with other departments on issues pertaining to transactions and negotiations that originate within the purchasing department and vice versa. Therefore, the system's functions and capabilities are going to benefit the organization to a greater degree if everyone is in on the decision-making process, and the learning process begins from the initial stages."

"The team is the key," says a buyer who requested anonymity. "Each function has expertise to offer."

Mainly it appears that the role and responsibility of members on technology buying teams is information gathering. Team members network with each other, determine requirements, evaluate products and establish specifications.

Purchasing plans

In 2001, corporate purchasing managers plan to buy desktop PCs (80%), notebook PCs (53%), servers (59%), workstations (38%) and software (20%). Buyers who say they plan to acquire software this year are, for the most part, updating current systems. Typical is the director of purchasing at a company in Florida who is handling all of the buying activities surrounding a "total corporatewide desktop conversion to Windows 2000."

Sixty-five percent of respondents plan on buying these technology products direct from the manufacturer; 43% will purchase them through the reseller channel; and 37% say they use the Internet to source computer equipment and software.

When searching for that supplier, 71% say quality is the most important criterion the buying team considers. Other important supplier-selection criteria include service (65%), price (63%) and delivery (50%). "Without quality and service, price does not matter," says Magellan's Roth. "Price obviously is an initial priority, but more so is the availability of prompt service and technical support in the event of problems, bugs, etc.," says Wilson of Pioneer Housing Systems.

All of the above plus technical support must be strong to create good value in a supplier," adds Roy Berlocker, procurement manager, Corecomm, Cleveland, Ohio.