Online-based IT procurement useful but limited

Online-based IT procurement useful but limited

Summary: Procuring enterprise IT over Internet has benefits but limited applicability as most investments generally require face-to-face protocol, which Web can't substitute and may also carry risks.

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Procuring enterprise IT over the Internet brings ease and convenience, but this method is restricted to the types of IT products that are standardized and typically do not require hefty bills, customization, and regulatory compliance from companies.

IT procurement is increasingly moving online today because it is starting from zero, with "perfectly usable and useful software" now available to individuals and teams in a company, said Somak Roy, senior analyst for enterprise solutions at Ovum.

Such software is easily evaluated, tried and purchased online, often at price points where procurement approvals and protocol are not needed. But it applies to certain cases wherein only individuals or small groups, rather than the whole organization, use the software, and the software is fully functional without heavy duty customization or configuration, he added.

Guriq Sedha, research director at Gartner, added that the online procurement is also well-suited for low-cost, standardized or commoditized hardware items such as laptops and other peripheral accessories. For example, a company already signed a contract deal with a vendor or reseller specifying certain laptop models and the required software configurations, so individual employees can make online orders for those pre-agreed models on the seller's site.

Sedha acknowledged that the IT procurement landscape overall is changing due to Web and mobile technologies, with vendors offering hosted procurement solutions via the cloud, for instance. But IT procurement transacted on the open Internet is far from mainstream, he emphasized.

Whenever "big dollars" and associated services like support, customization, and project management are involved, there will inevitably be back-and-forth negotiations before any financial commitment is made, the Gartner analyst said.

Enterprise-level IT investments are usually specialized, expensive, and come with exacting terms and conditions such as licensing, warranty, and compliance that must first be agreed on. All these mean the procurement process is complex and cannot be carried out in isolation over the Internet, he added.

Roy argued that traditional nuances of the IT buying game do not change even with the popularity of cloud services and Web-hosted applications. "Any software that is priced above the no-questions-asked limit on a corporate credit card or team budget requires approvals. And approvals require business cases, adherence to IT and procurement policies and standards, tenders, request for proposals (RFPs) and negotiations.

"Naturally, buying cannot be online in such cases. This is how companies make non-trivial IT purchase decisions, the software delivery or payment mode does not change anyway," he noted.

Policies and parameters key
The Ovum analyst added that the use of online IT procurement is not always limited by the inherent nature of enterprise IT products or services, but security and legal implications too.

The purchased software might become a repository for sensitive data, from a regulatory or reputation standpoint, and the employee in question may not be aware or care if the vendor is viable, has the proper security controls, or whether regulations on data remaining within national borders apply to the application purchased, Roy explained.

Andrew Bartolini, chief research officer at Ardent Partners, an analyst firm for supply management, agreed, saying maverick or rogue online purchasing have a real cost to the enterprise. Such repercussions can have various causes--when users don't buy from contracted suppliers, pay higher prices, or buy IT equipment that is non-compliant to the company's IT policy or incompatible with the existing infrastructure, he elaborated.

But rather than stick to legacy offline processes, he urged companies to do procurement via an electronic portal in order to have visibility and control over all transactions. These e-procurement systems can have parameters--as set by the procurement team--that guide end-users through the buying process, and also allow the team to better understand the needs and preferences of end users, Bartolini pointed out.

Gartner's Sedha added that comprehensive policies about procuring online are needed to ensure consistency and compliance throughout the IT environment as well as minimize business risks.

"The bosses want people to buy in a certain manner, to ensure they buy only what they are allowed to buy at the right price, from the right vendor, and under terms and conditions approved by the organization," he added.

Useful but not always suitable
Companies ZDNet spoke to said as much as online procurement had its usefulness, it remained appropriate to certain IT purchases only.

Patrick Fiat, general manager of Singapore-based hotel Royal Plaza on Scotts, said the Internet has made it faster and more effective to search and research for products in just a few clicks before making decisions. The hotel makes online purchases for IT products that do not require user customization, as such standard hardware and software are for generic use, he shared.

Most online procurements do not provide a feasibility study of the strengths and weaknesses of a product, which is essential when selecting a vendor, he said. "This is especially important for larger scale projects and it is more efficient to meet the vendor face-to-face to lay out specific needs in this case."

Malaysia's Packet-1 Networks (P1 Networks) said it occasionally buys software online, and "standard and straightforward items" like hardware accessories are also suitable, according to the spokesperson. While there is less hassle involved, online procurement makes it difficult to have price negotiation and consultation, she noted.

Topics: Software, E-Commerce, Tech Industry

Jamie Yap

About Jamie Yap

Jamie writes about technology, business and the most obvious intersection of the two that is software. Other variegated topics include--in one form or other--cloud, Web 2.0, apps, data, analytics, mobile, services, and the three Es: enterprises, executives and entrepreneurs. In a previous life, she was a writer covering a different but equally serious business called show business.

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