The research from KnowledgeBus reviewed IT spending across 20 sectors including banking, retail and manufacturing. This revealed that the NHS had paid a margin 920% above the trade price for one product. One charity also paid a markup of 850%.
The scale of these margins is a clear cause for concern when the industry best practice - as outlined by the Society of IT Managers (SOCITM) – states that margins should exceed no more than 3% of the trade price.
KnowledgeBus is now calling on IT managers and procurement teams to become more proactive in reviewing their IT spending, and to closely monitor the market in order to ensure they are achieving best price.
Al Nagar, head of benchmarking at KnowledgeBus, said “The size of some of the margins is a concern. In all likelihood these will be products that fall below the scrutiny radar – the one-off or low volume purchases, which may be a distress item or spontaneous buy. They may also be smaller items like extension cables, USB flash drives and SD cards.
“The scrutiny of spending on these items cannot be neglected, however, as they often make up a larger than expected percentage of the budget - in some cases as high as 25%.”
On IT equipment generally, organisations did show that they are gradually reducing the average margins paid overall.
Housing Associations, for example, have managed to reduce the average margin paid on IT products from 36% in 2012, and 24% in 2013, to 20% in 2014. In general, the average across all industries dropped from 21.1% in 2013 to 19.6% in 2014.
“A slight drop in margins across the board suggests that organisations are getting better at scrutinising their IT purchases,” said Nagar.
“Achieving the best price on IT products can be difficult, with trade prices in a constant state of flux, and yet product lifecycles send prices down over time. Securing optimum price requires careful monitoring of the market situation and data analysis. In the main, IT managers and procurement teams are becoming more vigilant but the research has shown better value and savings could be achieved.”
Some sectors were, however, shown to be going in the wrong direction. The education sector, which had average margins of 12% in 2012, has since seen its margins creep up to 19% in 2013 and 23% in 2014.
See the full IT Margins Benchmarking Study by KnowledgeBus.