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Dell: Gov's cost-cutting mania is driving away suppliers

UK biz losing interest in gov contracts, warns PC giant

Dell believes the UK government has squeezed suppliers too hard on price - to the point where the PC giant, and others, are walking away from public sector business.

Major IT vendors, including HP, have already questioned where the Cabinet Office will go next to ease its budget woes, having forced the biggest players to lose a few zeros from invoices.

Tim Griffin, chief executive at Dell UK, said the government had reached the end of the road in terms of negotiating down contractual margin.

"You've only got to look at the way it is managed today, there is intermittent participation [from suppliers]," he told The Channel. Industry sources tell us that Dell has walked on several occasions where the Government Procurement Service was using tools such as e-auctions to drive pricing to the bone.

"As have all suppliers," said Griffin, "I am cognisant of everybody having done that. I can't give specific instances."

GPS has moved at the last minute from "e-auction to best and final sealed bids," said Dell's UK boss, because suppliers did not want a race to the bottom on price. He added there has to be a "win-win" situation for both the customer and the supplier, who – after all – exists to make a profit.

"When you get to that balance of diminishing returns,” said Griffin, “how do you manage to get to the next level of efficiency for both parties?”

“My preference is that we sit down more proactively with the government and talk about how can you step beyond commodity purchases because we've got a broad portfolio."

System integrators, as well as major tech manufacturers, aren't too happy with the way the government's IT strategy has developed since the coalition came to power.

Last week Tim Gregory, the boss at CGI UK, was reported as saying that if large suppliers are forced to take all the risk for little reward, companies will shift investment to countries where governments are more friendly.

Some folk may take this as Dell (and other suppliers who did well off the back of the taxpayer) bleating that the gravy train has come to a halt. This would be an over simplification of the situation, said Richard Holway, chairman at TechMarketView, but he agreed supplier/government relations had reached a low point.

"This year will be make or break in terms of the relationships between suppliers," he told The Channel.

Holway said numerous suppliers had told TMV that innovations they proposed to public sector buyers on ways to manage and procure IT better had fallen on deaf ears.

"Government is interested only in cost cutting," he added.

The Cabinet Office refused to comment. ®

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