Purchasing budgets for PCs & software get boost in 2000
By Susan Avery -- Purchasing, 11/4/1999
Corporate purchasing managers plan to spend more on PCs and software in 2000. Reasons for the burgeoning budgets: business expansion and technology upgrades.Eighty-three percent of purchasing managers responding to a new Purchasing Magazine survey say spending on computer equipment, peripherals, and software will increase or stay the same next year as compared to 1999. Those whose budgets are getting a boost in 2000 say the hikes will average 20%. A year ago, respondents to a similar survey said technology spending would rise by 40% due to preparations for Y2K readiness.
For 2000, all of the preparations--and the spending that entails--is over. Respondent after respondent planning on budget increases for next year say such hikes are due primarily to a growing work force and need to keep abreast of new advances in computer technology.
A purchasing manager in the South, for instance, plans to buy "new and improved equipment (desktop PCs, servers, and networking) as well as additional equipment due to growth."
At Inlander Brothers, Chicago, Ken Beville, director of purchasing, says his company "installed a new computer system this year and plans to purchase new laptops for the sales force next year."
A "need for additional computing power for new software" is the reason a buyer in the Midwest plans to purchase additional desktop PCs in the next 12 months.
A manager of purchasing on the West Coast has an increased budget next year due to "more manpower, better resources, and higher needs."
At IVS Incorporated, Livonia, Mich., Janis M. Williams, purchasing manager, says, "We are growing, adding employees and workstations. Several people are budgeted for upgrades."
Overall, a whopping 92% of respondents have responsibility for technology purchasing at their companies. They are involved in these buys for their expertise at analyzing the market, selecting suppliers, negotiating agreements, and managing relationships.
A typical respondent is Jim Burfield, vice president, purchasing manager, Wachovia Securities, Inc., Charlotte, N.C. As part of his job, Burfield specifies brands of computer equipment, selects suppliers, negotiates pricing, and manages agreements.
Of those buyers who have a smaller budget to work with next year, many say it's because there was a spike in spending for Y2K compliance projects and technology updates in 1999. These respondents say their budgets have been adjusted to reflect this change for 2000.
Burfield says Wachovia's budget for technology purchases will fall next year because the company has recently "completed a refresh" of desktop PCs.
Similarly, James F. Sando, purchasing manager, Fremont Compensation Insurance Group, Glendale, Calif., says that spending on desktop PCs and software will decline next year because "Y2K purchases must be installed and tested in 1999 (by October). This won't hit the 2000 budget, but 1999."
A director of purchasing for a company in Maryland says "we developed and implemented a three-year technology infrastructure project in 1998 to upgrade and make consistent our hardware/software policy." Spending at the company will remain constant with that of 1999.
When sourcing computer equipment and software, corporate purchasing managers tend to select value-added resellers as their supplier of choice because of high service levels. Sixty-six percent of respondents, in fact, say they purchase through this channel. Another 51% buy direct from manufacturers such as IBM and Dell. And 14% buy computer equipment via the Internet. (Some respondents select more than one source for their technology purchases.)
A purchasing manager in Ohio appears mostly satisfied with his company's long-term relationship with its reseller because the supplier "provides consistent pricing and, in some cases, lower costs."
The director of purchasing from Maryland who sources desktop and notebook PCs through a reseller says, "We are on a lease program and haven't found the Net to facilitate that yet." Benefits to his company from the relationship with the reseller include "account familiarity. Other services are provided in view of account loyalty." The relationship with the reseller has been ongoing for five years.
Typical of those who purchase direct is William England, purchasing manager, Fletcher Paper, Alpena, Mich. He says his company has maintained a close relationship with IBM and Lexmark for many years. The reason? "Confident level of service."
It's only a matter of time before use of the Internet to order computer equipment takes off, say the 14% of respondents who already make use of the tool. Mainly, these buyers see use of the Internet as a way to help clean up business processes and lower total cost of acquisition.
Because of its potential "to help streamline the acquisition process and improve cycle time," Kenneth R. Brown, manager & chief procurement officer, strategic sourcing & contract management, Logicon Inc., Dallas, Texas, sees use of the Internet as a buying tool increasing next year at his company. Logicon is a Northrop Grumman company.
Another respondent says that his company will step up use of the Internet for its technology purchasing process next year. "IT will be able to buy with a purchasing card via the Web."
Others are not as keen on use of the Internet to purchase technology goods and services.
IVS Incorporated's Williams uses the Web to research technology and suppliers but is yet to be sold on its use to purchase items. "It's too insecure," she says. An information systems buyer in the Midwest agrees. "We do not use the Web to purchase. However, we do use it to get information on pricing, updated specs, etc."
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