Centralized Procurement: The Future of Global IT Sourcing

Breaking Free of the Channel

Ever since IT hardware has become a necessity to businesses around the world, global procurement for technology hardware has been inefficient. Most companies, to this day, have a hard time sourcing for their global locations.

One of these companies, a global technology firm, needed to upgrade servers to support an energy company across 30 countries. Unsure where to start, they reached out to distributors in the US for help. But they immediately ran into issues with feasibility and pricing.

Client:
“I was running into issues getting pricing. The same distributors just a different branch of them and I wasn’t getting a real warm fuzzy feeling on how they did the exporting. It was like they had never done it before. There was always something missing. What are the VAT taxes, what are the costs, or what has to be done? What happens if we don’t get it right?”

Unsure about the ability of the distributors, they contacted dozens of in-market resellers. But it took weeks to months for them to hear back, let alone receive a quote. The quotes would also come out significantly more expensive than a US quote for the same exact build. To add to the list of existing concerns, the firm had to worry about financing the deal and trusting a foreign reseller.

Client:
“I actually relied on a Pakistani reseller and he never came through. He couldn’t give me an answer for three months on the cost.”

Desperate for a solution, they decided to get creative and approached FGX with the problem:

They didn’t want to have to cut 30 PO’s, manage 30 different re-sellers, and overpay for hardware. Instead, they would buy everything from one or two resellers in the US, and then FGX would deploy the hardware globally.

Client:
“We wanted to make sure we could purchase this equipment in the US because we didn’t want to write a PO to every country. We wanted to be able to write one PO to a single person and let them go get the equipment for us.”

In essence, the firm wanted to centralize their procurement.

WHAT IS CENTRALIZED IT PROCUREMENT?

It’s a procurement model where you purchase your IT hardware from wherever and whomever benefits you the most (typically in one central location), and then deploy it out to each international destination.

Fast forward two months, FGX managed delivery into all 30 countries, door-to-door, utilizing our logistics, compliance, and trade services.

After the deployment, we interviewed the firm on how centralizing their procurement impacted their business.

A Better Way to Procure

“Centralized Procurement” helped the client in three main ways, it:

  • Lowered Their Costs
  • Saved Them Time
  • Eliminated Transaction Risk

Lowered Their Costs

By buying all their hardware in the US, the client was able to get more competitive pricing vs. buying in-market. It also meant that they could consolidate their buying power for larger discounts. Even when they added on the international import taxes and costs to deploy with FGX, pricing was still cheaper than the in-market solution.

FGX:
“Centralized Procurement performs better the more you deploy. We have all those fixed costs to bake in for each time we ship but you know 10, 15, 20, 30 more servers, you really start to see the savings compared to what local resellers can do.”
Client:
“And I saw that even when we did four or six servers. I actually see the difference in what it was going to cost.”

Saved Them Time

One of the most important things to the client was keeping their team efficient. They didn’t want their team to have to on-board, pay, and then micromanage 30 resellers in 30 countries. The language barriers and time-zone differences added further delays and frustrations.

FGX:
“How many work hours would you say you had to spend to interact and build a relationship with one reseller to get them to understand what you needed?”
Client:
“OK, let’s say you spent the work hours to track multiple calls to build understanding. You’re getting your CFO to talk to them, getting set up with credit and getting set up with all the documents to do the wire transfer. So with everybody involved, I would say, I probably had 70 work hours into it. You have to understand, going to you is like going to one person. I mean, if you want to look where I am, I’m talking about one call to you. I hated the fact that I had to go to other countries because I would lose control.”

Eliminated Transaction Risk

Trusting any company with many thousands of dollars is always a risk. Now imagine wiring money to a foreign company that you’ve never worked with. What if the vendor doesn’t fulfill their end of the deal? What if the equipment has issues? Can you even get your money back, if they don’t deliver?

FGX:
“What would you have to do to finance each deal with distributors and local resellers?”
Client:
“The reality is they make you pay upfront so here I am sending a check to somebody that I don’t know in a country that I could probably stand zero chance of getting money back or sueing them. There’s a lot of risk.”
FGX:
“That’s a really good point. From a financing perspective, this is something we don’t really think about. Since you don’t have a long term working relationship with them, the resellers are going to make you pay upfront.”
Client:
“It really became quite a negotiation just to try to get my company to go ahead and cut the checks. We had to trust they would be honest and deliver on their word. Working with FGX the trust was there, you knew what you were doing. We were able to cut one PO and able to deliver everywhere.”

Where FGX Came In

We help companies deploy IT hardware into over 155 countries. FGX manages everything door-to-door while owning the communication between all stakeholders. FGX’s IT deployment services make it possible and easy for companies to centralize their own IT procurement.

Client:
“I want to really talk about some great things that FGX does that I have not seen with anybody else. You guys send back a report every day as to where it is. I mean my CFO is probably one of the most difficult people to impress, and they love FGX because of all the reports.”
Client:
“The other thing is, I never had a day that I called you personally and hadn’t been able to get what I needed to get to the next step. You’ve always spent time with me so I understood what the pitfalls may be or how it can be done easily or if it couldn’t be done at all.”
Client:
“The reality is we have been able to do it because FGX got everything there successfully, and made us look like the experts. In reality, FGX is the expert, but my leadership now looks at me as the expert and I like that.”