Banking on the public sector?

The Government’s decision to sustain its spending on technology in the public sector for the time being has resulted in manufacturers investing more in this area than ever before. While this is a lucrative market that should be a key target for vendors, it is crucial that they consider the risks before adapting their business strategy.

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In the clearest indication of the shape of things to come, the recent budget announcement, in which Alistair Darling outlined his plans to cut public spending by £9bn from 2013 - in addition to the £5bn already announced in last November's pre-budget report - should serve as a stark warning to every IT vendor.

Leading accountants have already criticised the Chancellor for setting unrealistically low targets for cutting Britain's overall deficit which may result in a much more radical approach to reigning in public spending over the next three to four years.

Against this background, can vendors seriously regard the public purse as a plausible way of riding out the recession, or should targeting central and local Government as well as public corporations be a strategy best avoided?

Ultimately, there are two factors that need to be carefully considered.

Firstly, there is the financial aspect. With other sectors tightening budgets and IT investments becoming less of a priority for the board of directors during these economically challenging times, competition for vendors to secure public sector contracts is fast becoming increasingly competitive.

Sustained public sector spending, at least until 2013 when Darling's cuts will start to bite, makes it an obvious area to invest in, but with big brand names that offer similar products competing for a small number of contracts, there is really only one prominent differentiation: price.

After submitting warranty details, specifications and a test sample at the first stage of application, it has now become commonplace for vendors - once through to the second stage - to be given the opportunity to enter a reverse e-auction to bid for a tender.

As its name suggests, this involves the preferred manufacturers bidding their best price in an online auction until the most appealing offer has been made.

Despite the Government’s promise to open up tenders to smaller businesses, this ongoing price war leaves little room for them to fight against the big brands that end up dominating the marketplace.

When vendors are looking at pricing competitively, it’s also important to consider Total Cost of Ownership (TCO). From point of purchase through to end of life, including the cost of running and servicing, every detail is measured to provide the TCO of the product.

Playing into this, considering the Government’s drive to reduce energy usage and emissions across the UK, green credentials might come into play. There are a variety of high quality products on the market that use less energy than standard equivalents.

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