Information technology purchasers intend to spend about 25% more on software over the next few months, according to results of a new Purchasing Magazine survey.

The survey, which was mailed to 1000 purchasing managers with responsibility for the IT spend at companies nationwide, queried buyers on budgets for 2002.

Every buyer who responded says he or she is involved in the IT buy (which includes purchasing of desktop and notebook personal computers, servers, networking equipment, printers and peripherals, software, telecom and servers). These buyers have responsibility for every aspect of the sourcing process: They determine requirements, select suppliers, negotiate agreements and manage relationships with suppliers, among other strategic activities.

"I have worked hard to become integrated with the IT organization and am even a member of the CIO's staff," says Caren F. Weiner, technical purchasing manager, Xerox Corp., Office Printing Business, Wilsonville, Ore. "By being so involved with the organization, I am able to join the IT procurement process at the very beginning stages. I work with my internal customers to source items, evaluate potential suppliers, negotiate all agreements, and manage the ongoing business relationships with strategic suppliers."

It's important to companies like Xerox for procurement to be involved in the process for acquiring computer equipment and software for the reasons Weiner states, among others. At GlaxoSmithKline in Philadelphia, Howard M. Richman, director, procurement, information technology, North America, says his company relies on the procurement operation to "help consolidate requirements, establish sourcing strategies, leverage the business, reduce cost and manage risk" for its IT purchasing.

Seventy percent of IT buyers responding to the survey say their company's purchasing tab for technology will increase or stay the same in 2002. Those whose budgets are bigger this year will be spending on average 25% more in the months ahead. They expect to purchase software, desktop computers, servers, networking equipment and printers and peripherals.

Spending increases are slated for 2002 as some companies upgrade old equipment. Scott Henrickson, senior buyer, Carl Zeiss IMT Corp., Maple Grove, Minn., says his company, is boosting its IT budget because of a "recent relocation to a new manufacturing facility."

Other companies have rollouts of Microsoft's new operating system, Windows XP in the works. Still others are purchasing notebook PCs to replace desktops.

Charles R. Loyed, director of purchasing, Exopack, L.L.C., Spartanburg, S.C., has a budget that's 25% bigger this year to replace old equipment.

A vice president of purchasing in Florida who has a budget for 2002 that has increased 50% over 2001 is replacing back office mainframe systems because "it's a good market to be buying technology."

Even respondents whose spending on technology is expected to be the same as it was in 2001 are getting more bang for their proverbial buck: "Due to price decreases of 25-30% over the past year, we are able to actually buy more units for the same budget amount," says Paul Belew, director, A.T. Kearney, Plano, Texas. As such, he may reallocate some of his budget intended for PCs to printers and peripherals.

Thirty percent of respondents say IT budgets for 2002 are decreasing, compared to those for 2001. Spending on technology at these companies is down 36% on average. Purchases most impacted by decisions to slash budgets include desktop PCs and printers and peripherals.

Respondents who will be spending less on IT this year say the decision is due to the sluggish economy, which has resulted in downsizing and reorganization at many companies. Others, such as Rick L. M. Austin, C.P.M., strategic sourcing and supply chain manager, Vehicle Systems Inc., Ft. Lupton, Colo., have "updated technology significantly over the past two years."

Respondents are evenly divided on channel of distribution for computer hardware and software. They purchase equipment and software both direct from the manufacturer and through value-added resellers. A few use the Internet to place orders with both channels.

Weiner of Xerox OPB says, "We purchase from the source that provides the best overall value. Internet purchases are primarily for PCs and peripherals." She sees an increase in use of the Internet as a buying tool over the next 12 months as "we get Oracle IIi in production and enable greater e-procurement capabilities."

GSK will use the Internet "to facilitate new buying strategies and operations, but not as a sourcing mechanism," says Richman.

A.T. Kearney's Belew says use of the Web to buy technology at his company will increase "very little. The Internet does not offer any substantial process efficiency to the ordering of PCs." A vice president of procurement in Chicago agrees. "It's not cost effective, at our volume," he says.

Most respondents have been managing relationships with suppliers—both manufacturer and reseller—for many years. In fact, a majority of IT buyers responding to the survey say they've consolidated spending with one or two suppliers and have maintained the relationship for upwards of five years.

Benefits to their companies are many: better understanding of customer requirements, improved service, lower prices, process efficiencies, access to technical expertise. Adds Weiner of Xerox OPB: "We are considered a 'strategic account' so we can easily get the attention of upper management with these suppliers to resolve issues quickly and effectively."

"Having a sole source and deploying a standardized platform has significantly simplified our technical support and help desk process, yielding a reduced total cost of ownership," says Belew of A.T. Kearney. "It also has enabled us to maximize our volume leverage on pricing."