Changes in Procurement Strategies for the Federal Government Portend Similar Changes for Enterprise Class Businesses

The largest buyer of information technology products and services in the United States is the United States Federal Government. On April 20, 2011 Federal Computer Week published an estimate that the federal budget for simply IT products, and services ” . . . would rise to about $110 billion in IT products and services . . .” Of course this is a staggering number, within 13.4% of the entire sales for 2011 for the world’s largest producer of IT products, Hewlett Packard (HP) Corporation. If one cannot gauge the magnitude of this level of purchasing, simply consider that this $110 billion does NOT include the computer technology included in aircraft, military vehicles, weapons, etc. We think that it is entirely safe to assume that the complete US Federal Government budget for technology products and services is, more likely, in the range of the total gross revenue for HP and IBM in any given year. We hope we have now successfully communicated the true size of this purchasing group.

Any organization capable of the type of impact on markets like the US Federal Government ought to be watched very closely for all types of IT vendors, from large businesses to the type of innovative technology company that we often allude to in this blog. Therefore, we noted with keen interest a story, $20B GWAC Advances Federal IT Reform Goals. We should note that the acronym GWAC stands for ” . . . government-wide acquisition contract . . . ” All of this boils down to the fact that this purchasing group now has the capability of extending the pricing power of the GWAC contract to any agency or department within the Federal government that needs to purchase an item that is included in the contract. For government sales teams, this change spells the end, at least for now, of decentralized sales, which, over the years, had been a highly profitable business of selling the same product multiple times to multiple groups within the government without having to offer volume pricing. In sum, we think that the summary effect of the GWAC will be to establish a defacto centralized procurement for any and all of the included commodities.

Where the big herds go, we think the smaller herds will soon follow. Therefore, we think it behooves enterprise sales teams to start planning methods of working with this type of purchasing system as it starts to manifest in the private sector as we are confident that it will. If you are interested in this type of development in the market and need to ensure that your sales teams respond appropriately, then we can certainly help. You may telephone Ira Michael “Mike” Blonder at +1 631-673-2929 to further a discussion. You may also email Mike at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved

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