At a time when IT security budgets are already falling, a new study from Probrand has revealed the scale of margins some buyers are paying out to IT resellers which shows how businesses in some industries are unnecessarily wasting what little resources they do have.
To compile its new IT Product Margins Report 2019 (opens in new tab), the firm conducted analysis on over £12m worth of tech spending across 20 sectors over a two-year period. Probrand's report highlights how some organizations have been paying staggering mark-ups to suppliers, indicating that IT buyers aren't getting the IT deals they thought they were.
The most extreme examples in the firm's report show how organizations were found to have paid more than ten times the trade price for products. According to Probrand, one buyer in the banking sector bought Ethernet cables at a unit price of £42.32 when the trade price was 34p, representing an astonishing 12,347 percent margin.
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The Society of IT Managers' industry best practice states that organizations should not be paying more than a three percent margin to suppliers. However, the study revealed that the average margin paid across all sectors and purchases was a little over 14 percent which is almost five times the recommended mark-up.
Probrand's report also revealed which products drove the highest margins including a stylus pen which was bought for £73.24 despite the trade price being £5.62 (equivalent to a 1203.2% margin) and a wax printer ribbon with a trade price of £6.42 which was bought for £83.01.
MCIPS supply chain director at Probrand, Ian Nethercot provided further insight on the report's findings, saying:
“12,000% profit has never been deemed fair and equitable for any product purchase, and IT buyers are fundamentally not getting the deals they expect or deserve. The volatility and complexity of the market, with a dose of human intervention in between, is seeing IT budgets unknowingly wasted. Buyers are also consuming vast swathes of time doing their level best to manually get quotes, compare and negotiate discounts. We believe it is time for a change, buyers demand fair deals from an open and transparent market and that is exactly what the industry needs to deliver. Ultimately, it will help IT procurers save time and unlock more IT for their money.”
The report's analysis also showed that the legal sector was the industry paying the highest margin on average with a whopping 23.61 percent average. Emergency services was found to be paying the lowest margin at an average of 9.3% but this is still three times the 'best practice' price.
Businesses should think twice before purchasing IT products from a reseller with high prices and they should always check the trade price before completing a purchase.
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