The vendor backdoor
- 22 August, 2001 17:40
The Victorian Department of Education, Employment and Training's (DEET) decision to tender for the supply, implementation and support of 23,000 PCs across all Victorian Government schools has precipitated a dramatic response from resellers across the State.
Not only have they slammed the State Government's lack of foresight and failure to incorporate local business in the tender process, they have also criticised the way in which vendors use such tenders to bypass the channel and extend their direct relationships with end users.
Ken Peat, owner/manager of Echuca-based reseller Peat's Office Equipment, pointed out that the direct deals the Government is striking with vendors through supply tenders is coming directly out of regional resellers' bottom line.
"Our markets have been gradually eroded through government tenders that deal directly with the vendors," Peat said. "The government says they represent everybody, but they end up giving all the profit to the vendors and leave the resellers out in the cold."
Peat estimates that the latest government tender could see his company lose as much as 60 per cent of its business. He lamented the impact on regional communities, saying that many businesses were unable to redirect their business focus and were forced to close their doors.
"[The Government] will be using these PCs to educate kids throughout the State, but where are these kids going to get jobs if, at the same time, the Government destroys the local business community," he said.
Franz Van Der Ploeg, managing director of Victorian-based integrator Southern Cross Business Machines, told ARN that the government tenders are a misguided attempt to save money.
"It looks like they are going to cut out the middle people; a lot of these big vendors win the business on the basis of service contracts with local companies, and then turn around and ship the product to Melbourne to be serviced," Van Der Ploeg said.
Van Der Ploeg also revealed the margins available to resellers participating in government supply relationships are approximately 10 per cent of what they receive on other commercial contracts, making the process virtually untenable. "For every 10 computers we supply through our relationship with vendors that have government tenders, we only have to sell one into the commercial space," Van Der Ploeg said.
Vendors are also leveraging these supply contracts to offer cut-price PCs to government employees.
"Once they get the contract, it doesn't stop there," Van Der Ploeg said. "The vendors start offering PCs to teachers, and even the parents, at the same prices. I am picking up leaflets all the time that promote special prices through the schools."
Jim Belbin, business solutions consultant with Mildura-based reseller Office Everything, estimates the latest State Government tender could cost the company as much as $250,000 per month.
Despite repeated attempts to approach the Victorian Government in order to voice his concerns, Belbin believes they are simply turning a blind eye to the plight of the regional business community.
"We are trying to lobby," Belbin said. "These trends also affect the people upstream from us; the distributors will be losing business as well."
"I know the Govern-
ment is dealing directly with the vendors in order to cut costs, but ultimately they are removing any local element from the production and supply of these systems.
The Department of Education declined to comment to ARN .