News Column

E-Procurement Catching On

October 2002, HISPANIC BUSINESS Magazine

Tim Dougherty

As with e-commerce generally, online procurement has yet to live up to its advance billing as a revolutionary business concept. There are signs, however, that an increasing number of companies are turning to the Internet to fulfill their purchasing needs, often with impressive results.

According to a recent survey by Forrester Research and the Institute for Supply Management, the number of U.S. companies going online to purchase goods and services is growing. Of 331 firms surveyed during the second quarter, 84.2 percent reported having gone online to purchase items such as office supplies, up from 78.1 percent during the first quarter.

Moreover, the practice is paying off handsomely in some quarters. According to IndustryWeek magazine, Owens Corning, Lucent Technologies, and Hewlett-Packard Co. are just some of the large companies that have adopted online procurement processes to profitable effect. Owens Corning, for instance, reportedly has saved 10 percent on its annual corporate purchasing budget of $3.4 billion through so-called e-procurement.

Gartner Inc., an IT research firm in Stamford, Connecticut, projects that the value of materials purchased online will reach $3.17 trillion in 2003.

To date, much online procurement has been limited to high-profile companies that were quick to adopt the necessary technology. In fact, according to a recent report from Benchmark Research, such companies are far more likely to realize significant savings than firms that have been late in embracing e-procurement.

Even so, there is still plenty to recommend online procurement. AMR Research, for instance, reports that companies, on average, can cut purchased-goods costs by upwards of 20 percent. And significant savings can be realized through increased efficiency and productivity.

What’s more, there are indications that small and medium-size firms are beginning to realize the potential of online purchasing from a contractor standpoint. Abel Magaña, who manages the RedWire Diversity E-Business Network at HispanicBusiness.com, says that more Hispanic-owned companies with annual revenues of less than $5 million are expressing interest in his procurement database.

RedWire, which currently maintains information on 2,100 Hispanic-owned firms, is in the pilot phase of development and is being positioned as a purchasing collective that will enable members to enjoy discounts on essential business services, according to Mr. Magaña. Ultimately, however, RedWire will offer minority certification assistance and otherwise prepare member companies for contracting opportunities with the federal government and corporations, he says.

"We basically see ourselves as a kind of procurement university for small and medium-size Hispanic-owned companies," says Mr. Magaña, who heads New Media operations at Hispanic Business Inc. "We want to help our members get a piece of the vast contracting pie. And that includes federal government as well as corporate contracts."

Government contracts in particular could prove a rich source of revenue for Hispanic-owned firms. Sen. John Kerry, chairman of the Senate Small Business and Entrepreneurship Committee, has introduced legislation that would increase the federal government’s procurement goal for small businesses from 23 percent of all prime contracts to 30 percent by fiscal year 2006.

Under the bill, co-sponsored by Sen. Kit Bond (R-MO), any agency that failed to meet its small-business contracting goal would be required to draft a plan for meeting it in the future. The legislation also would make the Office of Small and Disadvantaged Business Utilization a senior-level position at each agency.

IITC Gets a Piece of USAF Contract
Integrated Information Technology Corp. (IITC), an aerospace defense technology firm based in Denver, is among the companies recently awarded a multimillion-dollar contract to service the U.S. Air Force’s communication satellites.

IITC, headed by former Air Force engineer Francisco Garcia, will work on the one-year, $43 million contract as part of a team led by Harris Corp. If all options are exercised, the contract could run seven years and value $355 million.

IITC was ranked number 31 among the top 50 U.S. Hispanic-owned high-tech companies by Hispanic Business (July/August) on the basis of 2001 revenues of $16.71 million. Mr. Garcia says IITC’s revenues for fiscal year 2003 will be at least double last year’s because of the USAF and other recent contracts.

"This is a significant win for IITC, and many individuals deserve credit," says Mr. Garcia. "In particular, I would like to recognize and thank our team in IITC’s Colorado Springs office for their contributions to this win."

As a result of the USAF contract, IITC plans to hire about 60 additional workers. At the time the contract was announced, the company employed 250 people in seven states.



Source: HISPANIC BUSINESS Magazine


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