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What is Technology Procurement?

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  • Written By: Carol Francois
  • Edited By: Heather Bailey
  • Last Modified Date: 27 November 2016
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Technology procurement is a term used to describe purchasing of technology-based equipment for a business or organization. There are many different types of technology, but this term applies almost exclusively to computer and information technology related purchasing. Information technology procurement includes four types of commodities: software, hardware, consulting services, and support or maintenance services. The details for each type of commodity differ and must be managed with care. The information technology products are subject to almost constant change, thus requiring special focus to ensure that best value for dollar is achieved.

The primary concept of technology procurement is that advanced planning, scheduling, and group buying will result in cost savings and a more efficient business operation. These lead to increased profitability. Group buying, just in time delivery, negotiated bulk pricing, and end-of-life renewal clauses are all essential in technology procurement.

Technology purchases that are completed on an as-needed basis are significantly more expensive than group purchasing. For example, one desktop printer can have a retail price of $200 US Dollars (USD). However, a wholesale dealer can sell five of the exact same desktop printers for $125 USD each. Based on the budgets submitted, a company may direct departments to work with central purchasing to combine their planned spending for specific commodities.

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This process works best in an organization that is committed to reducing costs. Issues surrounding delivery dates, contract compliance, and customer service issues must be resolved internally before going out to contract. Group buying is the process of combining the total resource requirements for different departments and creating one purchase order. The departments can be physically located in a range of buildings, with the delivery dates, quantities, and conditions listed in the purchase order.

Just in time delivery is a central component of technology procurement. Under this model, the cost of storage is carried by the supplier. This type of delivery requirement is typically combined with group buying, keeping storage costs down. The procurement department is responsible for ensuring the purchased quantities of materials are ready and available for delivery at the specified dates and times.

Bulk pricing and negotiating is very important when completing technology procurement. Organizations that combine the total quantity required for a specific period of time are able to get lower pricing, based on a specific volume of purchasing activity. Negotiations are typically completed by the procurement director or senior buying agent.

Technology typically has a three-year useful life cycle. How these materials are managed and redeployed is an important consideration. In most firms, this short life cycle often results in firms leasing computer equipment. Included in the lease is an evaluation of the product value at the end of the lease. The materials are returned to the leasing company, and new equipment purchased, typically for the same monthly payments.

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