7.14.23 – CI
QuoteWerks’ Brian Laufer states that now is the time for integrators to evaluate the effectiveness of procurement relationships, processes and tools.
Sales can be a time-consuming and complicated process, with deals often requiring weeks, if not months, to close for even the most skilled professionals. Those timelines may be difficult to swallow for integrators looking to drive new sources of revenue and boost their cash flow. Getting the hardware, software and supplies required to complete prospective and current clients’ projects can be a real challenge today. This, in large part, is due to the global disruptions that occurred over the past three years.
The technology industry was significantly impacted by the pandemic and rapid shifts in demand and supply chain constraints. What began as a temporary move to work from home environments, is now driving more fluid (if not permanent) remote/hybrid HR policies in many organizations. As a result, it has forced many IT specialists to adapt their strategies and speed up critical project timelines.
With demand high and supply chains in flux (but improving), pricing has been, and in all likelihood, will continue to be a challenge, especially with inflation factored into the equation. According to Gartner, businesses are expected to increase their IT budgets 5.5% in 2023. However, that boost will barely keep pace with the annual rise in the Consumer price index (4.9% as of the April 2023 report). Inflation erodes spending power and limits purchases. As the prices of components go up, clients with inflexible budgets may have to delay projects and upgrades, constraining revenue opportunities for integrators.
The impact on profits can be even more concerning. To ensure project costs remain within budget, integrators might take the path of least resistance to close the deal and give up part of their margins, essentially leaving a larger percentage of the sale price for suppliers. Integrators need to take action to prevent profit erosion.
Expand the Supplier Ecosystem
Competition can be a good thing for integrators. Access to a large pool of products and services from different suppliers gives buyers more pricing leverage and options for delivery, financing and other terms that impact the sales. Integrators with fewer vendor, distribution and marketplace partners have fewer places to turn to when supply-chain shortages or other issues creep up.
Those are a few of the reasons why technology firms are expanding procurement ecosystems. According to the 2023 QuoteWerks IT Procurement Report, more than half (56%) of all IT companies increased the number of suppliers they utilize over the past three years. Adding vendors, distributors and online-options helped many firms minimize supply chain disruptions and inflationary pressure. Between the global pandemic and ensuing (and ongoing) availability issues and rising prices, many integrators were forced to seek alternate sourcing options. This has helped maintain, if not deepened, those relationships as pressures eased.
An expanded supplier ecosystem has many benefits. The more sourcing options, the better the chances of finding the components and supplies needed to fulfill RFQs and last-minute orders. A larger supplier network also creates a more competitive bidding environment. Here, it allows technology providers to submit RFQs and negotiate prices and terms with a broader base of vendors, distributors and marketplaces. That gives integrators more control of their procurement processes and their profitability. The more competitive the pricing options, the greater the margin potential when working with budget-strapped clients.
Overcoming Larger Procurement Ecosystems’ Challenges
Technology providers should continually assess their vendor, distributor and other supplier relationships based on overall capabilities, including the ability to deliver quality offerings and support. Integrators must also focus on reducing the complexity of managing multiple supplier relationships. Working across multiple systems to develop quotes can require resources and time that integrators may not be able to spare as operational demands grow, especially when hiring constraints limit bandwidth.
Time is money. Quickly determining availability and negotiating pricing is essential to close competitive deals. That’s an objective integrators should strive for regardless of the client’s urgency. Prices and portfolios tend to change over time, so the faster tech firms can lock in those orders, the better the chances their sale will go through.
That requires efficient processes and knowledgeable employees. While the uncertainties and complexities involved in managing these critical relationships grow as integrators expand their supplier ecosystems, tools can simplify the process. Quoting solutions, online marketplaces and IT industry-specific integrations make it easier than ever to optimize deals for all parties, including clients and integrators. A larger supplier pool gives the latter group more negotiating power and flexibility.
Distributors remain the number one supplier for the IT business community (48.6%), but their web-based competitors like Amazon Business are gaining. In the procurement report, 32% of respondents listed e-tailers as their primary sourcing partners today, up from 6% in the 2022 survey. Experts suggest the continued strength of distribution —despite the availability of online, direct and brick-and-mortar procurement options — can be attributed to the value-added services in integrators’ line card.
However, IT firms are increasingly focused on availability and competitive pricing, particularly with products and components that remain in short supply due to supply-chain issues (though all signs indicate those concerns are diminishing).
Automation to the Rescue
The best way to optimize is through process efficiency and technology. Integrators understand the power of sales-quoting tools, and are increasingly adopting and integrating new systems to speed the procurement process and boost deal margins.
To remain competitive in today’s fast-paced highly competitive environment, integrators must automate and innovate to succeed. Expanding supplier ecosystems and leveraging automation to best manage those relationships are two of the most effective ways to achieve those goals.
Are new supplier partners a part of your company’s plans? Now is the perfect time for integrators to evaluate the effectiveness of procurement relationships, processes and tools. New investments in each of those areas can provide a solid financial return and boost client retention.
Brian Laufer is vice president of QuoteWerks.