Monday’s Musings: Consider Consortium Buying as a Win-Win Strategy

Published on October 27, 2008 by R "Ray" Wang

Falling revenues, crumbling custom systems, and declining budgets often bring municipalities, state authorities, and related agencies together to gain efficiencies in vendor selection, purchasing power, implementation, maintenance, and support costs.  End users in the private sector seeking long term efficiencies may want to take a page from the public sector and consider shared services consortium buying.  Here are three reasons enterprises in similar industries or within large corporate entities may consider shared services consortia:

  • Vendor leverage.  Industry specific consortia can provide a check and balance with the vendor in pushing for functionality requests and prioritization of bugs and enhancements.  Many consortia offer more than one solution to keep this check and balance alive.
  • Purchasing power. Properly designed consortia deliver buying power that reduces the incremental unit cost per user.  Areas for improvement include license fees, hosting costs, and support resources.
  • Staff retention and recruitment. Consolidating a critical mass of IT talent allows for shared knowledge, improved collaboration, and increased training opportunities.  Improved margins allow for investment in staff development and investment in the latest technologies and releases.

The bottom line.

Operational efficiency lessons learned from the public sector are applicable to private enterprises.  Natural places for consortia development include primary nodes of networked enterprises.  For example, a high tech manufacturer could standardize on 2 vendors and negotiate a license that would allow its suppliers and channels to incrementally add on.  In some cases, industry trade groups such as as Blue Cross and Blue Shield in the health insurer space could provide such services.  Depending on the legal structure of some user groups, such services could also be delivered.  Consider software vendors such as CGI, Lawson, and Oracle for their expertise in arranging such agreements.

Your POV.

Got a consortia experience to share?  Have any other tips for the economic down turn? Post a comment or drop me a line at rwang0@gmail.com.

Copyright © 2008 R Wang. All rights reserved.

  • Ray – this is good stuff. We did this for our city. Now I’m in the private sector trying to do the same for our clients. It seems that we need to have a certain spend, about $2 to $3M in licenses to get the program started.

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