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The health of competition

November 27, 2013

Remember “The World Is Flat”, the best-seller by Tom Friedman that hailed a future of open competition and innovation driven by a global networked economy?

Just how true have those forecasts proved to be? For a brief period, we certainly saw aggressive action on input prices as low cost economies provided multiple opportunities to outsource or offshore both manufacturing and a wide array of services. Procurement practices evolved around the theory of endless competition, placing most suppliers in a defensive position as they fought to maintain margins and market share.

Yet ironically, while global markets have clearly produced some new suppliers, in many industries the level of competition seems to have dropped. Innovation, consolidation, altered levels of dependency, increased teaming – these are among the factors that have led to shifts in buyer / supplier power in industries such as oil and gas, automotive and pharmaceuticals.

But what about the IT industry?

Since our global economy is so dependent on information technology, healthy competition within this sector is critically important. The UK’s Office of Fair Trading – essentially the competition watchdog – is trying to understand the current state of competition, especially with regard to the public sector. It has developed questionnaires to cover off-the-shelf software and IT outsourcing and is seeking input from both customers and suppliers. It is also interested to hear from anyone with perspectives on this topic in other countries. There is more information – and access to the questionnaires – at
IACCM is supporting this study because we believe in the merits of competition and frequently observe actions by both buyers and sellers that are damaging to it. Opportunities to explore and promote ‘good practices’ are therefore important and we encourage participation in the survey.
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