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LETTERS: Multinationals can't deliver

LETTERS: Multinationals can't deliver

Thanks for bringing to light an alarming trend occurring across Australia with large deals being awarded to multinational vendors ("Education squeeze", ARN, March 13, page 1).

Government standard operating environments (SOEs) are a short-lived trend, since it soon becomes evident that it is virtually impossible to maintain a hardware standard in large organisations.

I have seen tenders here in Western Australia awarded for 2,000 to 6,000 systems to a prime contractor (often a global brand) with the rationale being cited that this will save money due to "volume purchasing" and "reduced IT costs" as a result of standardised computer hardware. The reality is that most organisations do not require all the systems in one delivery (as there is existing hardware in service), and even if they did the vendor would be hard-pressed to supply 6,000 systems within a short time-frame (let alone 23,000 as in the DEET Victoria case cited in ARN).

So what occurs is a steady rollout of systems over a three to nine-month period (and often longer). And guess what happens . . . the hardware specification changes, new video cards are released, that whiz-bang top-of-the-range Pentium III 600 Slot One CPU is no longer available, etc . . . (did I say SOE??)The second problem is that if systems are delivered in a one-off hit (as has occurred here in Perth), they are often put into storage by the government organisation and supplied to the desktop user as required (possibly several months after delivery). In terms of saving money due to volume purchasing, I often wonder whether the people in positions to make these decisions are competent. Have they never heard of the term "depreciation"?

The third issue revolves around something called "competition". Once again, the decision to purchase volume from one supplier is based on the misconception that the systems will be cheaper. And often the first purchases are very cheap. Many of these tenders are based on an exclusive supply deal, whereby the multinational is the prime supplier for a period of three years, with a minimum quantity order contract.

In one instance here in Perth, I was invited to tender for about 5,000 systems (over a three-year period). My price was about $2,200 per system (we had been dealing with this government body for eight years, had provided on-site warranty and delivered and set up all systems). The multinational competitor won the tender with a system price of around $1,850, to be reviewed every three months (a price that was below our assembled system cost). I was later contacted by some of my former customers, who informed me that they were charged about $280 set-up fee for EACH system (a fine-print clause in the contract!!)Some nine months into the contract, another department was having so many problems with the multinational vendor's system that they requested a quote from my business for 10 high-end systems (if I was 10 per cent cheaper they could justify purchasing outside the contract). My quote was $2,900 (and I later found out that the multinational high-end SOE system quote was $3,700). My customer gave me a verbal order pending a purchase order (PO) being raised. The requisition for the PO somehow made its way to the multinational vendor via the contract manager at the government department. The multinational suddenly came in with a revised quote of $2,850 (amazing what a bit of competition does).

The so-called "volume" pricing would have cost the taxpayer an additional $8,500 for 10 computer systems if not for a competitive quote being supplied.

Three years into this contract, the IT head was removed, the SOE abolished, the prime contractor terminated and everything is now moving back to the original purchasing system (I am told the government department in question is financially crippled).

However, the damage has been done. Many suppliers that had substantial dealings with the government organisation have since closed their doors.

I hope that your magazine continues to highlight this problem as I believe it is a serious issue that affects many small-to-medium white-box assemblers, who I honestly believe are the engine room of a healthy IT industry.

Name supplied.


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