NHS margins under the knife
NPfIT suppliers warned not to charge 'platinum prices' and advised to offer services
Resellers hoping to play a part in the NHS National Project for IT (NPfIT) should be prepared to accept tight margins or offer strong services as contract prices are forced down.
NPfIT head Richard Granger displayed his liking for cut-price deals last week, as he outlined the need for picture archiving and storage system vendors to match price cuts made by system and infrastructure vendors if they are to win deals.
But if contracts are to filter down from the major suppliers to resellers, the price pressure will also apply to the channel.
John Griffith, an IT services consultant, said second-tier suppliers are already looking to recruit the skills to support NHS contracts, but he warned those bidding should not expect to charge "platinum prices".
"The NHS can be strict on price because of the high volumes, and it has become a buyers' market," he said. "Second-tier suppliers are queuing up to work with tier-one players, which will put more pressure on price."
According to Griffith, companies with relevant skills and experience can do well. But he warned: "If they think they have a product to command a premium price, they should forget it."
However, Griffith added that, despite the prominence of the NPfIT, resellers should still target the healthcare market because there is still a lot of business to be won.
"The NPfIT will attract a certain level of business, but not at the expense of existing NHS trust contracts," he said.
But Richard Sykes, chairman of outsourcing consultancy Morgan Chambers, added that product sales are not going to build the margins in this type of market unless resellers differentiate through services.
Sykes said Granger's success in cutting prices should be a signal to the industry to move into services.
"This is another ripple in the pond that says unless you are very good at moving product, the real margins are in the services around the kit," he said.
Firms selling IT products should use this connection as a foundation for selling higher-margin services in the future, he explained.
"It is about selling kit with a view to building relationships for services," he said.