Overview of DIR Sourcing Initiatives

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Overview of DIR Sourcing Initiatives
NATIONAL ASSOCIATION OF PURCHASING
MANAGEMENT September 16, 2008

• Cindy Reed
• Deputy Executive Director
• Operations and Statewide Technology Sourcing
• Texas Department of Information Resources

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Who is DIR?

• DIR is the state agency responsible for
• Effective planning, implementation and management
  of a statewide technology infrastructure that
  supports agency business operations
• Pooling the purchasing power of government and
  leveraging it to drive down costs and add value
  to ICT purchases for state government entities
• Adopting statewide technology rules and standards
  that contribute to effective enterprise
  management of ICT
• Promoting security and privacy of state data and
  networks
• Key operations
• TexasOnline, the official State of Texas website
• Data Center Services
• Telecommunications and IP Network
• Security
• ICT Cooperative Contracts Program

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ICT Cooperative Contracts Statistics

• 448 Cooperative Contracts
• 290 Total Resellers
• 140 HUB Prime Vendors
• 121 HUB Resellers
• 38 Growth in Last 2 Years (FY05-07)
• Over 1 Billion Projectedfor FY08
• Customer Base
• Market Segmentation Analysis
• 45 Education
• 29 State Agencies
• 26 Local Government

ICT Cooperative Contract Sales
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Where are DIRs Customers Located?

• REGIONAL DISTRIBUTION OF FY08 YTD SALES

Telecommunications Go DIRect sales of 36 M
were distributed to regions via prorated
percentage of sales.
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ICT Cooperative Contracts Cost
Savings/Avoidance

• DIR CUSTOMERS/TAXPAYERS
• Savings calculated as difference between DIR
  price and price available in other states and
  from other cooperative contracting programs
• Additional value (soft costs) not included in
  calculation
• Time/salary savings associated with streamlined
  procurement process
• Additional services or benefits such as free
  training
• Improved performance standards and accountability
  requirements

ICT Cooperative ContractCost Savings/Avoidance
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Strategic Sourcing Strategies Knowledge-Driven
Supply Chain
TECHNOLOGY
BUSINESS PROCESSES
PEOPLE
Skills, knowledge, and organizational
structure Move from traditional transactional
purchasing to strategic supply chain management
Revenue and Sales Reporting (RASR) analytical
platform
New, metric-driven business processes ? Spend
analysis ? Demand/opportunity analysis ? Improved
performance standards and accountability
requirements ? Specifications based on market
intelligence ? Category management ? Streamlined
administrative requirements ? Benchmarking ? Chann
el management
?
Comprehensive, integrated supply chain services
Contracting andProcurement Services manages all
phases of contract lifecycle
?
DIRect Compare
Online interactive tool enables customers to
easily review and compare contract pricing
?
Supply Chain Management provides business
intelligence/analytics, bench-marking, etc., used
to identify and prioritize contracting
opportunities, develop new contracts, and
implement new sourcing strategies
?
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Business Model ICT Cooperative Contracting
Program

• NEGOTIATIONS (RFO Process)
• Leverage states buying power
• Benchmark pricing with competitive regional and
  national cooperative buying options, federal
  government, and other states
• MULTIPLE AWARDS
• Provides flexibility to meet unique business
  needs of statewide customer
• NOT-TO-EXCEED/QUANTITY OF ONE PRICING
• Customers allowed and encouraged to negotiate
  additional discounts for volume purchases
• Go DIRect PURCHASING, ONLINE DIR STORE
• Customers deal directly with vendors for
  ordering, delivery, payment
• DIR ADMINISTRATIVE FEE INCLUDED IN NEGOTIATED
  PRICING
• Capped at two percent (2). FY07 average .81
• Vendor invoices customers (included in contract
  price), remits to DIR

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RASR Analytical Platform
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Supply Chain Life Cycle
Deliverables-Based Information Technology
Services Contract (DBITS)
BUSINESS CASE Value to state cost savings
more effective contracting vehicle

• RFO DEVELOPMENT
• RESEARCH
• With DIR customers, other states and federal
  government, Gartner, Forrester, Infotech

• SOURCING STRATEGY
• Prequalification of vendors for IT project
  contracts in specific technical areas
• Limited to 10 categories and projects of 10 M or
  less

• RFO ISSUANCE
• Webcast of pre-bid conference

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Sourcing Strategies

• Augmenting RFOs
• IT Staffing Services
• Software
• Networking Equipment
• Surveillance Cameras
• DBITS
• Prequalification of vendors in specific technical
  areas
• Regional-Based Contracts
• Break/Fix (equipment repair)
• Cabling
• Managed Services
• Contract with multiple qualified service vendors,
  to drive innovation, capacity and marketplace
  competition allowing customers to improve service
  levels, reduce operating costs and extend
  capabilities while remaining focused on their
  core missions

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May 2008 Operations Graybook

• Supply Chain Support

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Sales Actual vs. Projection
2008 YTD Data

• Monthly sales projection Most recent 2008
  Annual Sales Plan from Finance distributed to
  each month based on seasonality percentages in
  2007
• Sales has been performing at 5 above projection
  year to date
• If sales meet the projection in Q4, 2008 sales
  will reach 1001.9 M

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Sales, Cost Avoidance and Administrative Fee
YTD (Sep May) Comparison
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Sales Seasonality By Channel
(In Millions)
Observations
- 2008 YTD sales from all channels are performing
better than 2007- Jun-Sep is the peak season,
accounting for 40 of annual sales in 2007
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Sales By Product Type
13 Months Rolling Data
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Contracts with Major Sales Changes
YTD (Sep May) Comparison
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)

• (1) DIR-VPC-03-018 Large purchases by customers
  such as LCRA, HHSC, and City of Austin were not
  repeated in 2008
• (2) DIR-SDD-236 Large network purchase by
  Brownsville ISD in 2007 was not repeated in 2008
• (3) DIR-SDD-220 Customers switched to other
  vendors such as Dell and HP
• (4) DIR-VPC-03-010 Contract expired and was
  replaced by DIR-SDD-503
• (5) DIR-VPC-03-029 Contract expired and was
  replaced by DIR-SDD-232
• (6) DIR-VPC-03-001 Contract expired and was
  replaced by DIR-SDD-506 and DIR-SDD-515
• (7) DIR-VPC-03-027 Contract expired and the
  vendor failed to respond to the new RFO.
• (8) DIR-VPC-02-028 Vintages biggest customer,
  Texas Comptroller, did not renew the seat
  management services

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Dashboards Monthly Sales by Channel
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Dashboards Daily Sales and Administrative Fees
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Contract Management Information System Active
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Contract Management Information System Detail
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Contract Management Information System Reports
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Online Contract Gateway The DIR Store
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Online Contract Comparison DIRect Compare
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Future Contracting Opportunities

• CURRENT CONTRACTING INITIATIVES
• Posted on DIRs Web site (www.dir.state.tx.us/stor
  e/cci) to improve communications between DIR
  vendors and customers
• Lists initiatives by procurement stage
• Planning
• RFO Postings links directly to the posting on
  theElectronic State Business Daily (ESBD)
• Evaluation
• Negotiation
• Recent Awards
• Each initiative has a brief description, expected
  phase completion date, and contact information

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Major Procurements in Process TexasOnline
TEXASONLINE VISION STATEMENT TexasOnline will
provide a single point of access to government
information and services that is private, secure,
convenient, efficient, service-oriented, and
accessible.

• TexasOnline Reprocurement Vision
• The TexasOnline procurement will establish the
  next generation e-government infrastructure that
  implements the components required to support the
  TexasOnline vision. The TexasOnline vision
  leverages the states cooperative contracting
  program and the states existing investment in
  both computing and communications infrastructure.

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TexasOnline Re-Procurement Milestones, Estimated
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Major Procurements in Process TEX-AN

• CURRENT TEX-AN TELECOMMUNICATIONS CONTRACT
  EXPIRES AUGUST 31, 2009.
• RE-PROCUREMENT WILL TAKE PLACE FALL 2008 THROUGH
  SUMMER 2009.
• GOALS AND OBJECTIVES
• Simplify service acquisition
• Simplify service establishment and support
• Enhance value from sharing
• Establish solutions driven marketplace
• Enhance vendor partner/supplier performance