Abstract
Increasing Complexity of Procurement Process Challenges UPS Vendors
Due to an increasingly complex product procurement process, it has become mandatory for all
uninterruptible power supply (UPS) system vendors catering to the North American government sector
to be pre-qualified before they can sell. Government organizations have started following
commercially accepted best practices and implementing measures such as multiple award schedules and
government-wide acquisition contracts to streamline the procurement process. This is compelling
vendors to form good relationships with multiple gatekeepers such as prime contractors and General
Service Administration (GSA), an in-house purchasing group. Since this can be a tedious and
time-consuming task, some vendors are trying to gain wider access to government organizations by
forming partnerships with value-added resellers (VARs) that focus on selling only to the government
sector. Some others are entering agreements with GSA to cater to this sector directly.
This Frost & Sullivan research service on the North American government sector UPS market is
part of a niche UPS market study series offering valuable insights into specific vertical markets.
It examines the two broad application segments within the government sector: IT network applications
and mission-critical applications. It provides revenue forecasts by power range and application as
well as forecasts on applications and technologies that are likely to impact future demand for UPS
systems.
Increased Spending on Internal Security Drives UPS Demand
Following the 9/11 disaster in 2001 and the grave threats to internal safety within North
America, upgrading security systems across the country has become a top priority for the federal
government. In 2003, the bulk of the $52 billion annual IT budget was devoted to safeguarding
computer systems and networks from potential terrorist attacks and setting up of various critical
security systems.
Due to the governments growing dependence on IT systems, the need for quality UPS systems is
rising. "Opportunities for UPS system vendors in this sector look bright with increased
spending on IT and IT-related components by the federal, state, and local governments," note
the analysts of this research service. "State expenditure on IT is expected to grow by 8
percent annually between 2004 and 2009 to reach around $64 billion."
Increase in the Value Offering a Key Differentiator
Backup power systems have attained a commodity status, particularly in the lower capacity
ratings, due to various factors such as negligible technology improvements, low product
differentiation, and increasing competition. Vendors need to focus on expanding the value offering
to differentiate their products. "With competition being high and margins taking a hit, backup
power supply vendors must look at offering post-sales service and other complementary products that
can compensate for a slow repurchase cycle," remark the analysts.
Streamlined service channels can be a strong competitive factor in the government sector given
that prime contractors and procurement agencies tend to favor vendors that offer quick response and
repair time. Vendors would do well to invest in developing a well-structured service organization
that would earn the confidence of key decision makers and ensure repeat sales.
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