Strategic Tech Purchasing
- By Linda L. Briggs
Which kind of eProcurement setup is best for your institution?
Weigh the pros and cons carefully, then augment your decision
with volume buying, standardization, and other smart moves.
DREXEL’s Bielec: Purchasing
cards are cheaper and easier.
FINDING WAYS TO better manage your purchasing strategy
can help save considerable sums not just on purchases,
but on back-end support costs. For suggestions on how
to cut tech procurement costs and control spending, we
spoke with CIOs at two universities and a senior manager of
higher ed purchasing at one of the biggest tech product
suppliers in the world. Here are their suggestions on ways
to control, standardize, and save on tech purchasing.
eProcurement vs. Credit Card
eProcurement is one of the most talked-about technology
solutions in purchasing. If you’re as yet unfamiliar with the
process, it refers to replacing paper-based transactions with
electronic ones. Purchases are made over the internet; a
school with an eProcurement system in place also has an
electronic method of producing a purchase order and tying
the transaction into the back-end accounting system. For
some schools, it can be an immediate money-saver.
“We are seeing a shift toward more eProcurement,” confirms
J'e Sartin, senior manager/higher education sales at
CDW-G, a provider of technology products
and services to business, government, and education.
Sartin’s advice for colleges and universities considering an
eProcurement solution: “You don’t have to [incur] a huge
expense to make the change.” Because there are many different
partners and eProcurement organizations to select
from, he says, “Customers can choose anything that fits
eProcurement isn’t for everyone though. According to
John Bielec, CIO at Drexel University in Philadelphia, the
university has been saving money for several years through
JPMorgan Chase PaymentNet
purchasing cards, a highly effective route to procurement,
Bielec maintains. To control spending, he says, staff
members are simply assigned appropriate spending levels
on the card.
As part of the card program, Drexel receives data once a
day from the card issuer, JPMorgan Chase. The data g'es
directly into the financial system. “It’s totally paperless,”
Bielec says of the three-year-old system. He estimates that
95 percent of purchases are now completed at Drexel
using purchasing cards. Compared to either an ERP system
with a paper invoice or an eProcurement process in
which a purchase is transacted online, a purchasing card is
several times cheaper, Bielec says. When Drexel implemented
the purchasing card system in 2002, the university
had just recorded over 12,000 purchase orders a year, he
points out. Three years later, he reports, that number had
dropped to 2,700; an 80 percent decrease —and an indication
of considerable savings.
“When anyone mentions eProcurement,” Bielec adds, “I
say, ‘Why would anyone spend the time and effort to go
through all that process—because it’s a lot of overhead—
when the credit card is the simplest and easiest way to do
business?’” He points out that 95 percent of purchase
orders at universities are typically for less than $2,000, and
that magnifies the labor savings possible when eliminating
purchase orders, as purchasing cards do.
Rather than an all-or-none solution, many schools have a
variety of procurement programs in place, all of which work
together. At Wayne State University in Detroit, for example,
there are three programs, according to John Camp,
First, like Drexel, the school issues a procurement card
(the Visa ProCard) to WSU employees
who have spending authority, empowering them to make
online purchases. Monthly statements are available online
and by e-mail; controls are in place to prevent excess
spending or unauthorized purchasing.
Second, WSU’s Purchasing department has set up a
direct online order system with select vendors such as
Apple, Dell, and Gateway,
each of which has a contract (with established pricing
schedules) with the university. That speeds up turnaround
time and reduces paperwork.
Third, when open bids are solicited, WSU uses an electronic
bid process, in which requests for proposals (RFPs)
and requests for quotes (RFQs) are posted on the purchasing
department’s website, to foster competition among vendors.
Camp says that WSU’s purchasing department has
considered third-party solutions such as SunGard Higher
Education’s HigherMarkets for Banner eProcurement system, but there’s no current move to
review or deploy one.
Buy in Bulk, and Standardize!
One obvious way to save on tech purchasing costs is
through volume purchasing, and according to WSU’s Camp,
there are a number of techniques administrators can use to
negotiate the best prices for volume deals. First, he suggests,
look for purchasing consortiums that have already
done the pricing legwork for you. Then, compare their prices
to your offers in hand. If you’ve narrowed product selection
down to a specific vendor, educate yourself about the different
sales channels the vendor offers. At WSU, Camp says,
“we’ve found that the government/education price is not
always the lowest price.”
In just three years, Drexel’s purchasing card system reduced the number of purchase orders per year by 80 percent, reports Bielec.
Also, be aware of deals being offered elsewhere at your
institution before engaging in any negotiation, Camp says.
That ensures that you’re informed about the potential size
of the volume-purchase deal before engaging in any negotiation.
Be aware, too, that bulk deals offer opportunities for creativity.
For a better price, Camp suggests agreeing to serve
as a reference site or success story for the vendor, if either
is in your best interests.
Buying any item in bulk can have a hidden benefit as well,
says CDW-G’s Sartin. Beyond the obvious savings up front
(because of the volume buy), there is a second benefit, often
even more significant over the long term: the back-end cost
savings inherent in managing a single software application,
computer platform, or other item, he points out.
Rein in Maverick Spending
Curtailing “rogue spending” that can lead to off-contract
purchases and non-standard equipment can be a challenge
indeed. One approach yielding success, Sartin reports, is
the eProcurement website. Typically, such a procurement
site is set up for access via the school’s intranet, and it
offers users a complete online catalog of products preapproved for purchase by the university—items that can
range all the way from computer CDs to autos. This kind of
procurement control method is catching on because
reporting and tracking is greatly improved.
WAYNE STATE UNIVERSITY’S Purchasing
posts RFPs and RFQs on a public
website, to foster competition among vendors.
“Now administrators are able to go to the site and track
all the orders,” Sartin says, including “which credit cards
were used, and who made the purchases.” And because
shopping information is consolidated in one place, purchasing
is easier for users, which helps to curtail trips to
the local Best Buy for off-contract equipment. The online
catalog method also is a cost-saving strategy because it
reflects prices that the university has already negotiated
with each vendor, typically giving buyers a choice of items
at reduced rates.
Issuing credit cards with limits, as both Drexel and WSU
do, can also be successful, Sartin says. And the cards can
be used as part of a more comprehensive eProcurement
system. One drawback to credit cards: They can encourage
the very kind of rogue buying that you’re trying to control.
“Often, administrators will set a daily limit, but they don’t
indicate where you need to purchase products, or what
brand or type of product should be purchased,” Sartin adds.
Camp agrees that institutions can better manage their
general-purpose IT environments by controlling off-contract
purchasing, but is careful to draw a distinction between
discipline-specific IT equipment used by a single department,
school, or college, and general-purpose IT equipment
such as computers, servers, printers, and productivity software
used throughout the university. The former types of purchases
are managed locally, and that is appropriate, he
explains. For general-purpose IT equipment, however, “purchases
should be managed globally
to reduce costs and improve
the quality of support,” he says.
To reduce off-contract spending
and move toward better management
of resources, Camp
suggests establishing standards
committees (for both hardware
and software) that can recommend
products that adhere to
general industry standards. It’s
important that committee members
represent key constituencies,
he stresses, “including IT
leaders, key customers, and purchasing
representatives, all of
which have a vested interest in
improving IT services across campus.
To encourage university personnel
to follow committee recommendations,
he adds, make it
easy to access the appropriate
product catalogs, enlist the support
of the Purchasing department, and become an advocate
for the reasons behind simplifying IT environments.
Mind Your RFPs
Bid proposals are challenging for universities because of
extreme pressure both from within an institution and from
vendors to get the best pricing and the best value. One suggestion
from Sartin: Tailor the RFP to very specific needs
rather than simply fill in pertinent facts on a standard form.
If you’ve narrowed product selection down to a specific vendor, educate yourself about that vendor’s various sales channels; the government/education price is not always the lowest price.
“Many times there’s a boilerplate RFP, and you just fill in
what you want,” he says. “But now we’re seeing customers
write more specialized RFPs, so they really get what they
need from a price as well as a service standpoint.” That
means focusing on smaller issues like turnaround time, customer
service attributes, or certain web capabilities.
Because both the Purchasing department and university’s
General Counsel office will be involved in RFPs, Camp suggests
developing a close, working relationship with representatives
of both offices. “Any healthy relationship requires
good communication, mutual respect, and trust,” Camp says.
“When those traits are associated with IT, Purchasing, and
Legal, the result is better RFPs, proposals, and awards.”
In fact, Camp’s comments are good advice for fine-tuning
your purchasing strategies overall. Good communication with
everyone who purchases equipment, along with mutual
respect and trust, can go a long way toward helping everyone
understand how solid purchasing rules keep costs under
control, helping standardize equipment, and making purchasing
and using IT equipment easier for everyone.
Linda L. Briggs is a freelance writer based in San Diego, CA.