iSuppli tool clears the muddy waters of PC procurement

Corporate IT procurement departments face a sea of uncertainties as they try to obtain PCs at the best prices and with the most flexible contract terms from their suppliers.

Factors including changes in product roadmaps, rapid evolution of technology and a divergence between pricing and actual PC costs all muddy the waters for IT product procurement departments as they attempt to make buying decisions. To chart their course, IT departments need readily accessible information on present and future product trends as well as on the cost of PC technology now and in the future.

That's why iSuppli Corp. has created the Compute Systems Cost Analyzer (CSCA).

The CSCA is an Internet-based interactive database updated on a quarterly basis that provides estimated and forecasted cost data for PCs and their components. The data is presented for eight quarters into the future.

"IT procurement professionals can use the CSCA to estimate the true cost of PCs they are considering buying," said Matthew Wilkins, senior analyst with iSuppli's Market Intelligence Group. "For example, a procurement professional can select the type of PC he or she is procuring, the region of delivery, the brand of microprocessor and its performance, hard-disk drive capacity, memory type and density, display and other parameters. The tool then produces a cost estimate for the PC and its constituent components—and forecasts pricing developments in the future."

Such information is crucial as IT departments evaluate proposals from suppliers. Supplier proposals often seek to lock clients into specific PC vendors, and do not identify costs of individual elements. Furthermore, suppliers offer no readily available way to look at different pricing scenarios for hardware procurement, such as fixed pricing, yearly versus quarterly pricing or volume price breaks.

The process of IT hardware procurement is further complicated by the sheer amount of technological jargon employed by suppliers. This often leads to apples-to-oranges comparisons between different products that only benefit the hardware suppliers.

Solutions-based systems proposals are designed to give suppliers more room to maneuver in negotiations, and seek to mask the true costs from the customer. The complex global IT supply chain, including the supplier, the contract manufacturer, the OEM and the distributor, also obscures visibility into true hardware costs.

All this can result in a badly timed and poorly executed IT procurement deal that can involve paying too much for hardware, or a lack of periodic price cuts over the contract term, or a failure to take advantage of a technology transition.

Understanding PC costs, combined with a comprehension of supplier gross margin, allows IT departments to ascertain whether they are paying too much for IT hardware. Armed with this data, IT departments can determine how much room they have to negotiate over price, giving them greater leverage in supplier negotiations.

"Even if such information yields a savings of only 10 percent per PC, on a purchase volume of 10,000 units, that represents a total cost reduction of $100,000," Wilkins noted.

The CSCA can be employed for other tasks as well, including:
-- Determining whether the price paid for PCs correlates with component cost trends.
-- Timing purchases properly.
-- Optimizing product transitions from a price and performance perspective.
-- Determining whether PCs have higher performance than needed for the required tasks.

"IT procurement waters often are muddied by a lack of information from suppliers," Wilkins said. "With the CSCA on their side, IT departments can master the procurement game and become sharks in the sea of uncertainties that is the PC purchasing arena."

For more information on the Compute Systems Cost Analyzer (CSCA), please visit: http://www.isuppli.com/catalog/detail.asp?id=8078