PC vendors balk at 5% margin on Telecom business

Telecom will issue a request for proposal this week for one of the biggest PC deals of recent years. The question is: Will the vendors respond at the reportedly low margins of around 5%? At least one potential supplier has told Computerworld it is reconsidering whether it's worth staying in the bid, which will see Telecom replace its entire PC stock in a two-phase project. That's at least 7000 units and possibly as many as 10,000.

Telecom will issue a request for proposal this week for one of the biggest PC deals of recent years. The question is: Will the vendors respond at the reportedly low margins of around 5%?

At least one potential supplier has told Computerworld it is reconsidering whether it's worth staying in the bid, which will see Telecom replace its entire PC stock in a two-phase project. That's at least 7000 units and possibly as many as 10,000.

Around 3000 PCs will be rolled out in the first phase, by the end of June. Three brands only are being considered: Compaq, IBM and Hewlett-Packard. The latter already supplies around 80% of Telecom's PCs.

Though there's been some thought to having just one brand, there's a view in Telecom that multiple brands will give a better total cost of ownership measurement. The big change is that Telecom will lease, rather than buy. All of the major leasing firms are pitching for the business. They include Rentworks, Comdisco, Hewlett-Packard, IBM, Digital, Compaq and a newcomer to the New Zealand market, Macquarie IT.

Competition for the business should be so tight vendors are privately asking whether it is worthwhile putting in a bid when margins are expected to be as low as 5%.

Those seeking the prime vendor business are Unisys, NCR, Computerland, EDS, Southmark, CSC and Telecom Systems, which may lose its current business of supplying process and delivery of technical services, under contract to Corporate Information Services. It has to compete with the outside vendors.

It's understood that Telecom hasn't done a formal total cost of ownership study but estimates there will be as much as a 10% saving over two and a half years by leasing. The benefits of reducing cost of supply, management time and technical support, plus having a consistent 32-bit operating system, may save as much as $1200 over the life of a PC.

The second phase of the rollout will include notebooks and printers.

Number One Services managing director Peter Macaulay has been running the vendor presentations under sub-contract to Deloitte Consulting Group, which has the overall contract.

Join the newsletter!

Error: Please check your email address.
Show Comments
[]