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NHS and charities paying over the odds for IT procurement

The NHS (opens in new tab) is among a number of organisations found to be paying a 920 per cent markup for IT products in new research.

Conducted by market insights provider KnowledgeBus (opens in new tab), the study reviewed IT spending across 20 sectors including healthcare and the not-for-profit industries.

According to the results, the NHS is paying nine times too much in IT procurement exercises, while one charity was found to be paying a markup of 850 per cent.

KnowledgeBus claims its third annual IT margins survey (opens in new tab) indicates that there is a lack of awareness concerning IT product markups across all sectors and many businesses remain under the illusion that they are getting a good deal.

"The size of some of the margins is a concern. In all likelihood, these will be products that fall below the scrutiny radar - the one-off or low volume purchases, which may be a distress item or spontaneous buy," claimed head of benchmarking at KnowledgeBus Al Nagar.

"They may also be smaller items like extension cables, USB flash drives and SD cards. The scrutiny of spending on these items cannot be neglected, however, as they often make up a larger than expected percentage in the budget - in some cases as high as 25 per cent," he added.

Margins gradually reducing over time

Despite the findings of extremely high markups, the KnowledgeBus IT survey did reveal some more positive information.

On IT equipment generally, organisations did indicate that they are gradually reducing margins overall.

Housing Associations are amongst those making changes, reducing the average margin from 36 per cent in 2012, to 24 per cent in 2013 and 20 per cent in 2014.

"A slight drop in margins across the board suggests that organisations are getting better at scrutinising their IT purchases," claimed Nagar.

"Achieving the best price on IT products can be difficult, with trade prices in a state of constant flux, and yet product lifecycles send prices down over time.

"Securing optimum price requires careful monitoring of the market situation and data analysis. In the main, IT managers and procurement teams are becoming more vigilant but the research has shown better value and savings could be achieved," he added.

Unfortunately, the education sector has actually increased its margins, from 12 per cent in 2012 to 19 per cent in 2013 and 23 per cent in 2014.