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Procurement Tips to Reduce IT Costs

While larger cities benefit from having procurement offices to spend time researching, selecting, and negotiating with vendors, smaller cities can feel at a disadvantage when procuring items—especially technology products and services. And even procurement directors can have trouble keeping up with the latest hardware, software, and technology solutions.

Despite the overwhelming technical aspects of technology procurement, we’ve found through our experience that there are some basic tips that help cities get the best bang for their buck. Even if you’re not a technical expert, these tips can help you better prepare when you’re ready to invest in technology.

1. Spend time defining what you need.

It’s easy to just think “I need a computer” and go to a retail store to pick up one. Or to think that you know exactly what kind of software you need when you put out an RFP. However, we find that it helps to define what you need from a business point of view before starting to shop for a solution. What business problem do you need solved? What specific capabilities are currently lacking in your current situation? What capabilities do you need? If you can’t invest in everything you need at once, what are the priorities? Asking these kinds of questions helps you define your business problem and reduce the temptation of an impulse or gut purchase.

2. Shop around and know the industry.

This is where your IT staff or vendor comes in handy. You need someone with extensive knowledge of technology to do some shopping. An IT professional will stick to your requirements, understand when vendors are blowing smoke or distracting you with unnecessary features, and ask technical questions that you may overlook. All of this information will affect the price. Since the B2B technology industry is so competitive, starting prices are often ripe for negotiation. When you shop around, never view a price as final (unless it’s a clear-cut price listed in black and white on a vendor’s website).

3. Know your government pricing.

Government pricing isn’t always obviously apparent on major vendor websites and especially not when you shop retail. Take advantage of special discounts for local government offered by major hardware, software, and technology vendors. Sometimes it can be tough to navigate vendor websites to find pricing for specific contracts, select the right menu options that apply to your situation, and understand what’s specially priced and what’s not. Make sure your IT or procurement expert is able to figure out the best pricing for your city.

4. Don’t just settle on lowest price.

Technology is not like buying pens. If three pen vendors are in the running and one has the lowest price, you probably don’t risk a whole lot from buying the lower priced pens. With information technology, we’ve seen so many cities over the years treat a handful of complex IT vendors as equal and simply choose the lowest priced vendor. During the RFP or purchasing process, make sure you evaluate each vendor rigorously against your business needs. What exactly are you getting? What is the vendor’s reputation and experience? Will your business needs be solved? Price is a factor in your final decision, but not the only factor.

5. Look out for indirect costs.

Not vetting technology properly leads to many risks such as indirect costs. One common example is a low-priced vendor offering “24/7” support and maintenance. In many cases, that means installing some monitoring software on your computers but billing you at a high rate when a problem actually occurs—leading to an unpredictable annual IT budget. Another example is when a software vendor sells you software on the premise that it’s easy to install. Once you purchase the software, “suddenly” you find that you need to buy another kind of software, or a server, or additional Internet bandwidth, when you thought you were just paying for the software. Indirect costs usually strike when non-IT professionals buy a technology solution and lack experience to detect major red flags or ask the right evaluation questions.

Technology purchases can be quite expensive and complex. That’s why it helps to follow the steps above to make sure you’re vetting each purchase rigorously and appropriately. With many city revenue streams in a precarious state, you want to make sure you’re investing in the right technology responsibly. You don’t want to become so paralyzed with fear that you don’t buy anything, but you need to have the right guidance and expertise on hand to help you step boldly forward in your investments that will help achieve your city’s vision and business goals.

To talk more about technology purchasing, please contact us.

Original Date: 1/16/2014

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