Understanding IT Pricing - InformationWeek
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Understanding IT Pricing

When it comes time to make purchases out of their discretionary budgets, many IT people consult only one or two sources before choosing a supplier. But with just a few extra minutes of online research, significant savings could be yours.

You're in the middle of a project when you realize you're missing a crucial component: a network device, a client machine, a piece of software or some other IT commodity. It's well within your discretionary budget--you could easily buy it without going through the purchasing department or getting sign-off from a dozen executives. But you don't want to overpay for the thing, either. So what are you gonna do?

In the past, you went to your local computer store or reseller--and paid whatever it asked. Today, there is a growing and often bewildering list of IT retail sources and shopping Web sites, all promising the lowest price. Comparison sites, online catalogs, electronic auctions, value-added resellers, even the manufacturers themselves--they line up in your Google search like snake oil salesmen at a state fair, each hawking the best products at the lowest price. So what are you gonna do now?

If you're like most IT professionals, you probably have a favorite source or two. According to Nielsen// NetRatings, which tracks Web site activity, two sites most frequented by IT decision-makers are CDW and Newegg.com, both popular computer-catalog stores. In a recent straw poll of Network Computing readers, 55 percent of respondents said they compare prices from three or fewer suppliers before making a commodity purchase. Even in today's world of screaming Web sites, most IT people still do the better part of their business with just a few primary suppliers.

Company Roll Call

"For computer hardware, we usually go directly to the hardware vendor," says John Millonig, a systems consultant at CHS, a Fortune 500 company specializing in foods, grains and petroleum products. "We use a specific VAR [value-added reseller] for the majority of our other purchases." CHS does make small purchases online at CDW and locally at Office Depot and Comp USA. Most enterprises shop locally when they want to avoid shipping time, but buyers agree that the lowest prices are generally found online.

This limited-vendor buying strategy is common in IT, because people are afraid to buy from sources they don't know. Many are also befuddled by the plethora of technology purchasing and price comparison sites on the Web, which may well include fly-by-night shops operated out of somebody's basement. Better to be safe.

But the "safe" bet these days isn't always the most cost-effective. In fact, our research shows that IT departments could be paying 25 percent to 50 percent less for commonly purchased items by doing some simple Web research before making a choice. And we're not talking about buying knockoffs, used equipment or plug-compatibles, either.

What's more, buying from a previously unknown vendor doesn't have to be like sending a check into a black hole. There are many sites that can help vet retail vendors, providing reviews, feedback and customer satisfaction ratings. Although you might feel uncomfortable at the prospect of buying from an unfamiliar online seller who might not provide quality goods--or any goods at all--these "seller ratings" can tell you a lot about a potential supplier. If you follow a few simple steps, you can save your company serious money--without risking your job in the process.

To show you what we mean, we've shopped for a few of the most commonly bought items in IT, just to give you an idea of the range of prices and customer ratings you can find on the Web. This "minireview" is far from scientific or complete, but it provides a snapshot of the vehicles available for comparing prices, as well as a sense for how much your enterprise can save.

Needle in a Haystack

We were blown away by the number and diversity of sites on the Web that advertise the best price for a given IT commodity. Some of them are well-known; others appear to be little more than local garage sales. Some offer detailed feature comparisons of functionally similar products from multiple vendors; others give only a single, one-line product listing in each category.

There was simply no way to research all the sites, so we settled on six. Three of them--PriceGrabber.com, Shopzilla.com and Shopping.com--were cited in our interviews with IT professionals, price-comparison site operators and online catalog vendors. Another, PriceWatch.com, was listed as the most popular price-comparison site in the Nielsen//NetRatings list of sites most trafficked by IT executives. For comparison's sake, we threw in representatives of the two other popular multivendor selling avenues: online-auction leader eBay and online technology catalog TigerDirect.com.

We simulated a search and purchase in three categories: network devices, PC hardware and packaged software. Although many of these sites offer used, leased or refurbished gear, our test focused only on new, in-the-box products, so we could make an apples-to-apples comparison. This test was designed to show the range of results and prices--your experience will vary, depending on the sites you choose and the item you're seeking.

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