Technology Products 2 to focus on quality, not price

Framework leader lets CRN in on masterplan for the upcoming project

IT suppliers will compete almost entirely on quality, not price, on the second iteration of the Technology Products (TP) framework, its leader Kelvin Lee has told CRN.

TP2 is due to launch in September when its predecessor Technology Products expires. The Crown Commercial Service (CCS) has spent the first three months of the year carrying out market-engagement activities, with the help of TechUK, aiming to better listen to buyers and suppliers.

CCS's category director for technology Kelvin Lee, who has overseen the changes to TP2, told CRN that although overall the second iteration of the framework is an "evolution, not an revolution", there are certain elements that vary significantly from the original.

Similar to the initial TP framework, Lot 1 and Lot 2 will remain as Hardware and Software respectively, but Lot 3 will be Hardware and Software for suppliers that supply a mix of both.

Lee said this will make life easier for buyers and resellers.

"On TP1, there was confusion about combined requirements," he said. "The guidance was a bit woolly - it was a bit like 'if it is 51 per cent hardware, put it in Hardware', and customers don't want to be working that out upfront. Often, they would put competitions in the wrong Lots. So we've made it very clear: Lot 3 is for combined hardware and software requirements."

Lee said he was careful not to give resellers more paperwork, so if a supplier qualifies for Hardware and Software separately, they will automatically qualify for the combined third Lot.

Lot 4 will remain the same and focus on encrypted or information-assured products, and Lot 5 will also stay as is, allowing vendors to bid direct for high-volume product business across the public sector in an aggregated manner.

TP2 will also feature a new Lot 6, which will be called Catalogue. This will be SME-friendly and will run similarly to G-Cloud to better suit smaller suppliers. Lee said if any part of TP2 could be described as revolutionary, it would be this addition.

"Lot 6 is open to all and has a very low barrier to entry; it is very SME-friendly," he said. "But it is only for catalogue content, so you can't run further competitions in Lot 6; all the suppliers who win a place can feed content and pricing into the catalogue.

"The idea is that rather than five big resellers having control... it creates a place that a lot of new, small suppliers can play with CCS in the product space. I think it will be a big step change."

He added that at the end of the two-year term for TP2, if all goes well, the Catalogue Lot could be spun off into its own standalone framework.

Quality control

In the original TP framework, suppliers' bids were evaluated by public sector buyers according to quality and price, on the basis of a 60:40 split respectively. But in TP2, suppliers will now be judged almost entirely on the quality of their offering, with the split changing dramatically to 90:10.

"If you want to sell a few laptops or a few memory sticks, go and play in the Catalogue," he said. "If you want to play in Lots 1 to 5, you need to prove to us that you can add real value and can bring something different. It's not just about getting a really good deal with Apple, but do you want to pass on some of your rebates from Apple? Have you got lots of guys trained on Apple? Have you got engineers who are experts? This is what the resellers wanted as well - they wanted to prove they can add value and are not just selling tin."

On the first TP iteration, Lots 1 to 4 had a cap on the number of suppliers which could be awarded a place on each Lot, ranging between 10 and 15 suppliers. Lee said this caused some issues because - due to the strong emphasis on pricing - when suppliers missed out, it was usually only by a whisker, causing them to complain.

On TP2, the cap on the number of suppliers for these Lots will be removed. Lee said he expects the number of suppliers per Lot to be similar, but it will be almost self-regulated because of the new focus on quality.

"I did feel bad [for suppliers who just missed out]," he said. "I could see their issue. We'd gone for a more even price and quality [ratio] and we didn't do stringent quality checks. The price was based on ‘sign up to this margin' so you had pretty much every reseller who bid coming out at a very similar score. That couldn't be right because they are not the same sort of resellers. It didn't make sense.

"That 90 per cent quality [mark] will take care of [the number of suppliers on the Lot] so I am not going to put a cap on it. I could probably say I think it will be similar amounts than in TP1 by doing it.

"But I don't want to cap it because it would be hard on the person who just misses out."

"I'd like there to be a clear line between the top [resellers] and the next section."

Margin matters

Another change coming in with TP2 is new margin limits, Lee said. On the original TP framework, in the software space, the margin limit is one per cent and for hardware it is between five and six per cent.

Lee said that throughout his two years at CCS, and after speaking to suppliers, he has better understood their needs and so is altering the margins accordingly.

"Software seemed too low, so it is now 2.5 per cent margin cap," he said. "Hardware seemed too high, so we reduced it to 3.5 per cent. In reality it gives our customers the confidence that they are never, ever going to pay over 2.5 per cent and 3.5 per cent on the price, and remember, CCS has now done direct pricing agreements with the vendors, so we know what that price is. It is almost a capped margin to give our customers confidence."