IT Procurement 101: Is cooperative IT purchasing the future?
True Value hardware is a $6 billion retailer-owned cooperative with locations in 60 countries. By purchasing as a group, including IT, they secure huge discounts and preferred customer service. Public and non-profit organizations have begun to do the same. Cities, towns, villages, school districts, and colleges are joining forces to procure IT through cooperative contracts. Auburn University in Alabama, for example, engaged E&I’s GovConnection cooperative for their IT services. E&I is a not-for-profit buying cooperative that leverages the power of 3,000 institutions to reduce costs. Here’s what Missty Kennedy, assistant director of procurement services had to say, as reported at the GovConnection website http://www.universitybusiness.com/article/university-strategically-partners-cooperative-technology-purchases
“We reached out to E&I and explained our vision and what we were looking for…and they laid out all of our options. The procurement team already had a contract for peripherals, such as jump drives and cables, through GovConnection, as well as a separate contract with a manufacturer for hardware. When both contracts expired in 2013, we realized the opportunity to achieve significant cost savings through a singular contract with GovConnection. My IT community loved working with GovConnection and wanted the flexibility on the hardware side to purchase from any manufacturer.” Kennedy adopted E&I’s GovConnection contract in November 2013, and says it has been a great experience. “By purchasing through the Cooperative, we were able to work with the amazing GovConnection team we always worked with and save money at the same time. The team…assisted greatly in the transition to the Cooperative’s contract. When I look at my mission for procurement, it’s to partner with key strategic partners, and both of them serve that role for us extremely well. For this calendar year, the Cooperative contract has saved Auburn over $1 million.”
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Comment:
Every company needs technology at some level in order to operate, and the need will only continue to grow as the rapid development of new technology drives the need for constant infrastructure upgrades. This means means larger budgets that bite hard into a company’s margins. It is not surprising that many “non-technology” companies looking to reduce costs may cut back on technology, rarely a good decision.
While there are many ways for a company to control or reduce costs, the low-hanging fruit could lie in the initial purchase of hardware or services. This is where a cooperative purchasing initiative can benefit a company, of any size. There are different models of cooperative purchasing which could fit best for your company. One involves multiple franchises entities working as a single purchasing unit. Another involves multiple companies combining on a single procurement contract or agreeing to purchase jointly in the future.
A third approach would be to contract with a vendor selection company who gets “co-op based” pricing due to the large volumes of hardware and/or services purchased though a vendor’s channel group. By achieving this volume, a company like CloudAdvise can pass its savings on to customers.