- Analysis reveals resellers charging margins as high as 12,437%
- Companies found to be paying 14% margin on average
Technology services provider Probrand has released a study that reveals the scale of the margins some buyers are paying out to IT resellers – unnecessarily wasting IT budgets.
Analysis conducted on more than £12 million worth of tech spending across 20 sectors over a two-year period, highlighted some organisations have been paying staggering mark-ups to suppliers. This indicates IT buyers aren’t getting the IT deals they thought they were.
In the most extreme examples, organisations were found to have paid more than ten times the trade price for products. The report reveals that one buyer in the banking sector bought ethernet cables at a unit price of £42.32 when the trade price was 34p – that’s an astonishing 12,347% margin.
Industry best practice, as specified by the Society of IT Managers, states that organisations should not be paying more than a 3% margin to suppliers. However, Probrand’s study revealed that the average margin paid across all sectors and purchases was 14.08% - almost five times the recommended mark-up.
The report also reveals which products drove the highest margins. These included a Stylus pen, bought for £73.24 despite the trade price being £5.62 (equivalent to a 1203.2% margin), and a wax printer ribbon, with a trade price of £6.42, which was bought for £83.01.
Ian Nethercot, MCIPS supply chain director at Probrand, said: “12,000% profit has never been deemed fair and equitable for any product purchase, and IT buyers are fundamentally not getting the deals they expect or deserve. The volatility and complexity of the market, with a dose of human intervention in between, is seeing IT budgets unknowingly wasted.
“Buyers are also consuming vast swatches of time doing their level best to manually get quotes, compare and negotiate discounts.
“We believe it is time for a change, buyers demand fair deals from an open and transparent market and that is exactly what the industry needs to deliver. Ultimately, it will help IT procurers save time and unlock more IT for their money.”
The analysis showed that the industry paying the highest margin on average was the legal sector, with a whopping 23.61% average. The emergency services, however, were found to be paying the lowest margin, still three times ‘best practice’, at an average of 9.3% for IT purchases.
The Chartered Institute of Procurement of Supply said: “Probrand’s IT Margins report emphasises the need for organisations and procurement professionals to deploy digital tools to control and manage pricing.”
The report revealed that geopolitical factors, such as Brexit, are impacting prices in the IT market, and the IT supply chain was citing uncertainties around Britain’s departure from the EU as reasons to increase prices at the beginning of 2019.
The report also offers guidance on how those purchasing IT equipment and services can avoid paying over the odds and lists a number of steps that can be taken to prevent this. With this in mind, Probrand has launched a campaign which helps IT buyers by offering a free spend analysis on fifty purchases.
See the full report here