Squeezing the budget

Is the cheapest option always the best for cost-conscious schools?

Justifying an expensive purchase can be a difficult job, and for the education sector, which has been charged with the task of reducing its spending by £1bn between 2010-11 and 2014-15 from back-office functions and procurement, it is even harder.

Two years ago, the government spending review left schools scrambling to make savings across the board, and IT was by no means safe from the swing of the axe.
But while schools' IT departments try hard to rein in their spending, is the seemingly obvious step of simply buying cheaper goods necessarily the right option, or will the old adage of ‘you get what you pay for' come back to haunt them down the line?
And while schools have lower budgets with which to work, what impact does this have on their IT suppliers?

Recent figures from the British Educational Suppliers Association (BESA) suggest that schools are opting for the lower-cost IT route. Of the 603 schools across England that were surveyed in August by BESA and the National Educational Research Panel, a massive 84 per cent said they buy from low-cost web providers and either always or sometimes buy non-branded products.

Although a lower initial payment can save money in the short term, schools face the possibility that what was initially a bargain can turn rapidly into a costly burden. And budget-friendly buys that seem like a great deal can often turn out to cost schools more as hidden costs such as maintenance and extra parts rear their heads.

BESA director Caroline Wright warned schools to "consider the total cost of ownership of all products, taking into account the product's quality, warranty and fit for purpose", in a statement accompanying the figures. John Rudkin, an independent
e-learning consultant, agreed that the cost of ownership does not end with the initial purchase.

He said: "If your main focus is on purchase costs, you are looking at the wrong criteria. If you do not look at the lifetime of a buy, it can seriously come back and bite you. There are lots of hidden costs or unknowns that must be considered."

Schools are often put off expensive equipment because of the hefty price it carries, but dearer goods often have warranties, maintenance and replacement parts, as well the potential for increased value at end of life, meaning costs can be reclaimed in part exchanges or sell-back deals.

Furthermore, cheaper products that provide initial value can often include fewer features, and require supplementary technology as time goes by. And it is not just a case of buying the extra products: training schools' limited IT staff on how to accommodate the new additions can cost further time and money, negating the initial buy's value.

But investing in quality does not have to be a big one-off investment, according to Viglen's chief executive Bordan Tkachuk, who said that so long as the core technology is of good quality, devices and applications with short life spans can be added and removed whenever it is financially viable.

"Making the right investment in the core is mission critical [for schools] but devices do not [need constant investment]. The good thing about IT is the rapid rate of changing technology," he added.

"You do not have to pay for it all right away. If you make the provision, you can expand on it and do not have to carry the burden of the cost. Capacity planning for when you scale up is so important. You need to adapt infrastructure for the future.

"Not so many years ago, you could buy a decent PC [for a fixed time], but today you can guarantee that, after 12 months, it will be out of date - but you can still use it."

The BESA statistics showed that the lowest-cost product supplier is key to about a quarter of respondents, and primary schools are taking advantage of bulk-buying technology by working with other schools to buy ICT in clusters.

Getting a good deal

With end users feeling the pinch more than ever, there is an inevitable effect on the IT channel, from resellers to vendors.

European Electronique, an education-focused VAR, has noticed the changing market and responded with an increased emphasis on services. Chief executive Yolanta Gill explained that hardware margins are so low that enhancing the offering with services can cater for schools' needs while still creating a return for resellers.

"At the moment, the implication for the channel is that less money is being spent on ICT, and that schools are spending differently," she said.

"When selling devices, there is only a small percentage to be made, and it is very competitive to make money on hardware. We are looking to sell more services, as schools [moving] from local authorities are looking to procure these services through the channel, and we can make money here."

Gill added that the company's size meant it was big enough to bid for sizeable deals, but it was still small enough to be agile and adapt to the needs of its customers when market changes occur.

BESA's research also showed that schools are looking to make further savings by opting for discounted deals and special offers, a move that Mike Beech, RM's head of product marketing, said has had an impact on the business.

He explained: "We have had to adapt. Schools are looking for special offers, so we have done a lot more of that. They are looking for good deals and we want to push those out - they sell very quickly and we really need to be more price-competitive within the market."

So, while some resellers are often more able to adapt to the changing market, bigger suppliers can be less flexible in their business models. Seann Gardiner, EMEA sales director at Dell KACE, explained that its technology is designed for the long term, and that it cannot always respond to customers looking for a cheap fix.

"Our products are about long-term value," he said. "The investment is not just for the initial technology, but it includes updates and new functionality as well as a platform to develop. This is all what comes down to making a saving in the long term."

Viglen's Tkachuk added that no matter what the market conditions, the channel has the job of ensuring its customers get what is right for them, regardless of the price.

He said: "As a supplier, we want to make sure we sell the very best. Like all these issues [surrounding spending cuts in schools], taking a short cut is exactly that. To some degree it is a false economy to buy cheaper products for the long term; you have to build for the future and not today.

"IT is iterative and it continues to evolve and change."