NAPM InfoEdge
August 1998, Vol. 3 No. 12

How To Buy Technology


Table of Contents
  • Required Skills and Knowledge Members Only Content
    Technology is a hot commodity today, and quite possibly a mysterious one at that. Technological jargon — such as WANs, HTML, and EISA — flies fast and furious over the telephone and in meetings. Considering the speed with which the computer industry is moving, keeping up with the latest innovation for one's own PC can seem intimidating, let alone enterprise-wide software licensing or leasing of a firm's desktop computers. Buying technology, however, is not a mystery science. Similar to any other commodity, successful acquisition of technology requires an understanding of the basic issues and cost drivers involved in the purchase combined with some specialized knowledge. It also requires that a purchaser practice good, common-sense methodology. It does, however, differ enough from the purchase of other non-technology items — especially when considering the rapid rate of change in technology today — that the development of some specialized technical knowledge is recommended (and in some cases, required). An MIS or engineering degree is not required, although such background might be beneficial.

  • Adding Value to the Purchase Members Only Content
    Ensuring that the PC-based telemarketing database that the sales manager wants will actually work for the business can be a full-time job. One value-add that purchasing can provide in the technology purchase is thorough examination of the costs involved, and cost-benefit analysis. In a field where the players and products can change so quickly, examining the costs and value of proposed technology over time, and therefore the time value of money, can provide valuable insights into the potential acquisition. Like any other commodity area, purchasing can add value to the technology purchase through several practices:

  • Contracting for Software Members Only Content
    Contracting for and acquiring software has its own special intricacies. As a newer commodity (especially on the PC platform), there are few industry-standard accepted practices for fee schedules, upgrades, maintenance, and license tracking. In many cases, each supplier comes to the table with his or her own method of counting licenses and fees. In some cases, the purchaser may not have full freedom of contracting — several software manufacturers present varieties of "take it or leave it" contracting. It is the responsibility of the purchasing department to ensure that only acceptable terms are negotiated.

  • Hardware Members Only Content
    When looking to acquire hardware (such as computers, printers, or the like), a firm frequently has two main options: buy the hardware outright or lease it for a period of time. Each option, of course, has its own advantages and disadvantages. Buying technology allows a firm to depreciate the expenses over a period of time. It also brings a property tax burden. Leased technology, on the other hand, allows a firm to defer the related taxes. In addition, leasing allows a firm to avoid getting locked into old technology.


AUTHOR(S)

Brian Isikoff
Brian Isikoff is a purchasing consultant with Aetna Inc. and is based in their Walnut Creek, California, location. He specializes in acquisition of and contracting for information technology (IT). Mr. Isikoff played a key role in the pilot and implementation of the IT desktop acquisitions portion of Aetna's corporate acquisitions and payments system. Currently, he is involved with a number of commodities for Aetna's Western Region, including outside services, IT, and healthcare management-related contracting. He leads purchasing's and accounts payable's intranet development, and is involved with M/WBE development initiatives.

Mr. Isikoff holds a bachelor's degree from the University of Connecticut, is a member of the Northern California Chapter of NAPM, and is currently pursuing his Certified Purchasing Manager (C.P.M.) designation. He has contributed to NAPM's Purchasing Today® on the subjects of supply chain management and single source supply relationships.



REFERENCES
  • Gartner Group. Benefits Derived from IT Architectural Compliance and A Summary of TCO Costs
  • Intel Corporation. Manageability Basics and Wired for Management RFP Kit
  • MecklerMedia. PC Webopedia (http://www.pcwebopedia.com)
  • Microsoft Corporation and Interpose Corporation. Total Cost of Ownership (TCO) Overview, Reducing Total Cost of Ownership, and The Microsoft-Interpose Total Cost of Ownership (TCO) Model


FOR FURTHER READING

The following publications regularly cover issues related to purchasing technology:

  • Electronic Buyers' News
  • Internet World
  • Wired

Here are some specific resources:

  • Chandler, J.P. and Nuttal, R. "Buying and Contracting Technology-Based Products and Services," NAPM InfoEdge, September 1996
  • Singh, B. "IT Strategy: Align and Conquer," Purchasing Today®, July 1998
  • Feldman, D.L. "Contract Considerations For the Integrated Computer System," NAPM Insights, August 1995
  • Greguras, F.M., "Online Software Licensing," Purchasing Today®, August 1996
  • Meng, S.E. "Risk Assessment in Software Licensing," NAPM's 81st Annual International Conference Proceedings, 1996
  • Marlowe, T. "What To Do When You Can't Upgrade," Purchasing Today®, December 1997
  • Skaff, A. "Bits and Bytes on Leasing Computers," Purchasing Today®, March 1997
  • Williams, K. "We're in this Together," Purchasing Today®, August 1996

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