Selecting an IT VAR….More than just price! – Part 1 of 2

November 4th, 2013

When looking for a new IT Value Added Reseller are you learning everything they can offer you?”

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

It is easy for a company to tender an RFP to the IT world of the top 3 or 4 Computer Peripheral Equipment Resellers and make a decision after reviewing the responses and conducting interviews.  In many cases companies will create a contract for nothing more than an agreement of category discounts that will apply to purchases moving forward.  Sometimes the catalog prices are furnished sometimes they aren’t, but many times changes occur to the catalog that never get reviewed by the customer once the contract/agreement is signed.  Today and tomorrow we will be looking at how much more there is to learning about the incentives and control your company should be asking for when deciding on a new IT VAR or in evaluating the current VAR you have today.

Price the things you buy – A surprising number of customer we deal take a look at the IT VAR category and immediately want to make sure they are getting the best category discounts available.  This is good information collect and negotiate with the vendors but upon digging into their actual spend, 75% (or greater)  of the spend tends to be from just a handful of items.  In these cases, beating the IT VAR up on a category discount for network equipment does not do you much good if laptops and docking stations make up half of your spend in this category.  Review the best historical data you have to determine what items you frequently purchase and make sure you capture individual pricing on those items.

Category Discount Options – Since IT VAR projects will inevitably include collecting category discounts, understanding the options the suppliers will bring you in advance will help shape what you collect and expect.  The first model is the traditional discount off of list price.  This requires a catalog to be collected in advance of the final agreed upon discounts and updates to be supplied in advance of any pricing reviews during the length of the contract.  The cost plus model is one that is increasingly popular with the suppliers because it is easier to show their costs and calculate the markup from there.  This gives visibility into the supplier margins and is one suppliers and their customers like.  The third option which is newer but gaining popularity is the discount off of published list pricing (usually their website) so that invoices can be audited at any time and so that customers can take advantage of special pricing that is offered to the public as well as their discount.

Rebates – There are two areas that customers frequently overlook when evaluating IT equipment suppliers.  Both things tie directly into business 101 principles.  The first, rebates, we will talk about today the second we will cover in tomorrow’s blog.   Suppliers like numbers they can factor into their own company’s revenue stream.  The more accurate the number the more willing they will be to give you better deals to get your business.  Many will also be willing to “sweeten” the pot for spends that exceed estimates in the way of Volume Rebate Programs.  Make sure you are either requesting each supplier’s rebate program, or define the rebate program to the suppliers that you are expecting.  These rebate models should be tiered based and should be linked the amount of business you do with the supplier, increasing with each higher level.

IT peripheral equipment spends for many companies can be hard to manage especially if they are being managed by a non-technical procurement staff, but taking some of these items into consideration will help you find a “partner” who can help you manage the items and ensure that your staff is staying compliant with the agreement.  For more information on how SafeSourcing can assist with helping find an IT VAR that fits your situation or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative.  We have an entire customer services team waiting to assist you today.

We look forward to your comments.

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