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Different strokes in government supply

Different strokes in government supply

Local manufacturers, ASI Solutions and Pioneer Computers, hope to be included in all three sections of the NSW government's recently announced PC, notebook and server panel. But they will employ different tactics in a bid to wrestle a share of the action from multinational competitors.

As reported in last week's ARN, the state government is expected to spend about $500 million on hardware during the next three years. But it has centralised purchasing in an attempt to reduce costs and improve service levels. Centralisation is expected to make it even tougher for local manufacturers to compete as economies of scale kick in. In response to an increasingly difficult whitebox market, ASI has evolved its business to focus on service delivery.

"Our business has changed a lot and we are really after the services wrapped around the products," ASI director, Maree Lowe, said. "That could include everything from installation and developing a standard operating environment to decommissioning. But when you are involved in the provision of new equipment it gives you a platform to sell those services."

Pioneer, on the other hand, will take the big boys on in a price war. It has been supplying major state departments including NSW Police, RailCorp and the Department of Community Services for a decade. But operations manager, Jeff Li, knows it will take a sharp pencil to keep winning business.

"It will be very competitive because government will check every dollar it spends," he said. "We source Intel and Microsoft cheaper from factories overseas because if you buy locally you get killed by the multinationals."

He estimated vendors like Acer, Dell and HP could buy Intel processors and Microsoft operating systems for less than half the price paid by local manufacturers.

ASI has been a local government supplier for 15 years and has strong relationships with big spenders like NSW Police and the Department of Education and Training. But price pressures had forced it to re-evaluate its value proposition and more than half of its business is now services.

"PCs and low-end notebooks have become commoditised so the margins are very small," she said. "It's a bloodbath and everybody gets squeezed but it is still part of the bigger picture."

For ASI, that bigger picture now includes network and storage infrastructure, electronic document management, and cost-per-page printing and scanning. But although diversifying, Lowe still believes local suppliers have an important role to play in the provision of government hardware - particularly to regional areas - and hopes they won't be ignored.

"You would hope state government will support local companies that employ and train people," she said. "ASI employs 160 people, with a very large percentage in NSW.

"All of these [government] departments are distributed environments. It's very important to ensure regional areas get the same level of technology and services. They like to deal with local companies."

If the lion's share of hardware provision does go to then likes of Acer, Dell and HP, Lowe said ASI would look to work with them as a service provider.

"The world has changed and we are in a global market," she said. "Sometimes [multinational] companies want to own projects but don't want to deliver every part. We will partner where there is opportunity to do so."

Including sub-contractor relationships, Li estimated almost 40 local companies supplied to NSW government three years ago. That number has now fallen to just seven - ASI, Auspac Computers, Hypec IT, Ipex, Optima, Pioneer and TodayTech. As the market moves increasingly to mobile solutions, he said that picture is only likely to get worse.

"There's no local industry for notebook assembly compared to a couple of years ago," Li said. "Microsoft and Intel have to do something about the huge price breaks given to multinationals if they want to keep a local builder channel."

NSW issued a request for tender for its PC, notebook and server panel at the end of last month but it was then suspended. It will be reissued on October 5 and closes on November 2


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