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IT Haggling costs UK Businesses £4bn

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Shopping around by telephone and manually comparing price and availability for the best deal on IT is an outdated false economy says research program.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.

The report 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 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 UK’s IT buyers are ringing round to negotiate on price, which equates to over £530M in mis-placed hours and phone costs whilst over ¾ 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.

Désiré has been musing and writing about technology during a career spanning four decades. He dabbled in website building and web hosting when DHTML and frames were en vogue and started writing about the impact of technology on society just before the start of the Y2K hysteria at the turn of the last millennium. Following an eight-year stint at where he discovered the joys of global tech-fests, Désiré now heads up TechRadar Pro. Previously he was a freelance technology journalist at Incisive Media, Breakthrough Publishing and Vnunet, and Business Magazine. He also launched and hosted the first Tech Radio Show on Radio Plus.