4.1 Introduction

A typical business today spends 3 4 per cent of its turnover on its information systems. In some service industries, this figure can exceed 20 per cent. One partner in a professional services firm described its cost base as payroll, professional insurance and computing. The public sector spends vast sums on its computer systems and whether in the public or private sectors, a substantial proportion of this spend is on bought-in products and services. Where IT is outsourced, the external component of organizational IT spend can approach 100 per cent. Purchasing of IT is big business.

Not only is IT procurement big business, the use of IT to purchase is also a significant and growing business in its own right. From the earliest days of commercial computing, IT has been used to support the purchasing function. From basic, nuts-and-bolts internal purchase order processing systems, IT-enabled purchasing has evolved through Electronic Data Interchange (EDI), on-line catalogues, Web-based order, purchasing extranets, intelligent agents and business-to-business (B2B) electronic trading. All of this now falls under the general name of e-procurement. Electronic purchasing has become an integral tool in the development of lean manufacturing, just-in-time inventory and supply chain management. Indeed it is difficult to imagine such concepts as supply chain management being workable at all without powerful electronic purchasing systems. This chapter considers both of these aspects of purchasing. The first part of the chapter considers policies and some procedural aspects of purchasing IT. The second...