Buying through the Technology Products 2 framework is the best way for public sector buyers to avoid Brexit-fuelled vendor price hikes. That's according to Kelvin Lee, Crown Commercial Services' category director for technology products and services, who has opened up to CRN about the new framework.
Technology Products 2 went live on 31 October - right on schedule - and replaces the initial Technology Products framework. Dozens of resellers popped up across the six lots, including Softcat, ANS Group, Stone and XMA.
A number of changes have been made to the second iteration, designed to improve the process for suppliers and buyers and level the playing field for smaller firms.
Lee said talking to suppliers throughout the process of building Technology Products 2 has been essential.
"We've not done this well in the past - hands up," he said. "We needed to do the pre-market engagement bit much, much better. We are pretty good at sourcing, but we're not great at pre-market engagement."
With this in mind, Lee and his team began by presenting to around 140 suppliers over a two-week period, and following months of planning, fully briefed them again and explained what feedback has been acted on, what had not, and why.
He said being open paid off.
"The real tell-tale for me is the difference at the award stage," he said. "The difference between Tech Products 1 and Tech Products 2 was unrecognisable."
There was a very small delay on certain Lots on the framework, but this was not due to legal challenges.
"We didn't get one official legal challenge - lots of questions, don't get me wrong - but not one legal challenge," he said. "If you think, this is the biggest hardware, software and products agreement in Europe, and so many suppliers are interested, I think it's a testament that suppliers were fully aware of everything and didn't have anything they could challenge. We were very fair to everyone and if they didn't hit the mark, they understood what they needed to do before and they just didn't quite hit it.
"Someone said to me the other day 'well don't you get paid for delivering things on time?'. But speak to anyone in the public sector and delivering a potentially £4bn framework with that much interest, within 10 months to the day [is difficult]."
Based on feedback from the first iteration of Technology Products, Lee and his team decided to create a combined software and hardware lot, to avoid confusion, and also to create a new Lot six - a catalogue for everyday devices. The catalogue is "Amazon-eque", Lee said, and removes all branding from the supplier so they do not have an unfair advantage.
"All the customer can see is content and pricing," said Lee. "They have no idea which supplier they are buying from - they don't know the brand or who it is. All they can do is buy at the cheapest price [from a supplier] who has stock. That produces a really level playing field."
Terms and conditions were drastically simplified, and after starting over from scratch, they were cut down from 280 pages to between 10 and 20.
But he admitted that there was some feedback that he could not act on - yet. He said some companies - not a majority - had been keen for services to be included in Technology Products, but he said this is not appropriate for now.
"We have a separate services framework, and although I am not ruling it out in the future - this is exactly what I said to the market - TP3 might include services," he said. "But at this time, as people are disaggregating from large services contracts, we needed that clear distinction between products and services. We've not ruled it out."
"We've not just sat back and said 'oh look, all the pricing is going up'. We are in ongoing discussions with all the major vendors about the exchange rate."
The Technology Services framework is currently being set up, and if Technology Products were to be merged with any existing framework, it would be this one, Lee said. But he added that if it were to happen, it would be at least two years down the line.
Lee expects sales for the first year of Technology Products 2 to reach £650m, and £750m the year after.
Another big change for the second iteration of Technology Products is that margins have been rejigged slightly. Lee admitted that some suppliers were not thrilled with the changes but said most accepted them.
"Just before the agreement went out we did a roundtable with about 10 resellers - small to large - and had a really frank and open conversation about why I have done this," he said. "I think probably two of those resellers in the room really pushed back and said they couldn't live with those margins. But 80 per cent were happy with the process.
"The fact we got no challenge suggests it is extremely competitive, but fair. That's the feedback I am getting: 'we're not making a huge amount on this but you are doing a great job for your customers'. If they stop pricing then I know I have gone too far."
One thing that could not be planned for in the process of setting up Technology Products 2 was Britain's decision to leave the EU, which led to a sharp decline in the value of the pound, sending prices from many US-based IT vendors soaring as much as 20 per cent.
Lee said that suppliers are able to alter their prices "by the minute", meaning they won't get caught out. He added that a number of factors mean that Technology Products 2 is the best vehicle the public sector can use to avoid the price hikes, for now at least.
"The margin stays the same whatever," he said. "Within the catalogue, pricing can be updated by the minute. They can change it so they are not held to pricing from Dell, if Dell suddenly comes in with a 10 per cent increase. Saying that, we've not just sat back and said 'oh look, all the pricing is going up'. We are in ongoing discussions with all the major vendors about the exchange rate. We try to keep customers abreast of any price increases coming and we try to use all the stock in the channel before they have to buy from the US or China.
"We're giving the best possible advice to minimise the impact. But everything is traded in dollars so it will have an impact. Suppliers can't just ignore it - we've got to deal with it. Customers may well see the impact. There are 61 suppliers in there so they might have deals with distribution [to offset the increases]. Public sector customers using Tech Products 2 probably have the best chance of [avoiding being] affected by these price rises.
"They're probably in the best position. They will [go up] at some point, but not many of our customers have seen much impact yet because of the work we have done."
Chris Farthing, managing director of Advice Cloud, which helps suppliers get into frameworks, said that although it is early days, he is encouraged by the changes made to the framework.
"On paper it looks good and a lot of effort has gone in there, so well done to the team," he said, adding that he would welcome the framework being merged with Technology Services. "There is definitely space for them on their own, but there should be the ability to supply products and services together. I'd like to see CCS reduce the number of frameworks they have - it has increased at the moment, which can be a burden for SMEs".
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