Transcript Diapositiva 1

Avoiding getting locked in by one
contractor or technology
Research Department
Generating lock in is, in
same cases, part of the
vendor’s strategy
However, this is a rather unexplored
issue in Chile´s public procurement
IT Lock-in: when it happens?
When switching costs are important. Some are:
• Learning costs: When a changing supplier implies to learn a new
technology. It may involve adjustments in HHRR.
• Transactional cost: When changing supplier implies additional
payments to the current supplier or when changing supplier
involves additional investments in equipment, infrastructure or
others.
• Contractual or pecuniary switching costs: Examples include
airlines’ “frequent-flyer" programs, and “loyalty contracts" that
rebate a fraction of past payments to consumers who continue to
patronize the firm. These pecuniary switching costs are a form of
quantity discount or bundling.
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
IT Lock-in
Router´s example
Common knowledge tells that switching costs –due to lock-inplay a large role in IT markets competitiveness (Klemperer,
2005). Profitability in these markets appears to be driven by
the size of the customer base and customer retention, which
is at least partly determined by switching costs.
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Lock-in consequences
Less
innovation
Monopolistic
profits
Klemperer (2005, p 536)
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Welfare
losses
Less
competitive
market
What kind of purchases reveal in Chile,
eventually lock-in? (exemptions to public tender):
Measuring lock in in public procurement
Single vendor or producer
Nature of the negotiation
Contracting with intellectual wright's owners
Trust
Complementary goods with already owned
equipment
Related services
Categories:
IT services, IT and telecommunication's supplies, Software
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Results
Direct awarding
Total
(limited categories)
direct
awarding
%
Total
USD
Purchasing
orders
USD
Purchasing
orders
(amonut)
38,980,806
5,692
277,531,733
73,687
14%
* Figures are limited to specific types of direct awarding
** Figures are for 2010
Which vendors? (2010)
Top vendors
contracted
through direct
contracting
Nombre Empresa
Sistemas Oracle de Chile S.A.
TELEFONICA EMPRESAS
ESRI Chile
ENTEL CHILE S.A.
Microsoft Chile S.A.
EVERIS CHILE S.A
SYNAPSIS SOLUCIONES Y SERVICIOS IT LIMITADA
Policomp S.A.
Importaciones y Servicios Advances Computing Techn
MSLI Latam Inc.
Intersystems
Adexus S.A.
The Pegasus Group Company S.A
SEGIC USACH LTDA.
QUINTEC Soluciones Informáticas S.A. Casa Matriz
CLARO SERVICIOS EMPRESARIALES S.A.
SPSS Chile
VIA56 SA
S&A Consultores
SONDA S.A.
CAS-CHILE S. A. de I.
DP S.A.
EFT Group S.A.
MEDICAL TRENDS S. A.
Advise Consultores Ltda.
Servicios y Asesorías Héctor Hernán Alegría Melo E
Tecnoimagen
DICOM S.A.
CRECIC S.A.
VISIION LTDA
DELL
Monto USD* Cantidad OC*
7,209,013
117
3,298,856
138
1,433,565
74
1,255,122
90
1,022,280
20
980,705
6
787,532
4
785,706
1
752,763
10
646,145
10
587,520
1
518,651
45
486,926
5
455,141
50
422,852
21
401,267
53
328,738
28
315,685
3
312,270
5
309,805
27
308,326
229
294,510
1
260,000
2
254,705
1
214,719
2
193,121
1
188,593
16
188,448
31
183,131
52
180,382
4
176,023
39
How important is direct contracting
to these vendors?
Vendor’s name
Sistemas Oracle de Chile S.A.
TELEFONICA EMPRESAS
ESRI Chile
ENTEL CHILE S.A.
Microsoft Chile S.A.
EVERIS CHILE S.A
SYNAPSIS SOLUCIONES Y SERVICIOS IT LIMITADA
Policomp S.A.
Importaciones y Servicios Advances Computing
Techn
MSLI Latam Inc.
Intersystems
Adexus S.A.
Direct awarding
7,209,013
3,298,856
1,433,565
1,255,122
1,022,280
980,705
787,532
785,706
Top 5 affects163
institutions
Total awarded
7,212,691
11,534,420
1,594,985
2,380,223
1,455,270
1,695,380
912,720
943,114
%TD
99.9%
28.6%
89.9%
52.7%
70.2%
57.8%
86.3%
83.3%
1,674,519
45.0%
Plus in this industry the use752,763
of partners
is a very
646,145
2,174,857
29.7%
common behaiviour
587,520
2,292,822
25.6%
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
518,651
10,388,451
5.0%
Top buyers contracting through exemptions
(limited categories and exemptions -2010)
Institución
Dirección de Presupuestos
Ministerio del Interior
Tesorería General de la República
Policía de Investigaciones de Chile
Universidad de Santiago de Chile
Dirección General de Aeronáutica Civil
Fondo Nacional de Salud - FONASA
Universidad de Chile
Servicio de Impuestos Internos
Instituto Nacional de Estadísticas - INE
Ejercito de Chile
Ministerio de Educación
Dirección de Compras y Contratación Pública
Servicio de Salud Metropolitano Central
ARMADA DE CHILE
Defensoría Penal Pública
Carabineros de Chile
Ministerio de Vivienda y Urbanismo
Corporación de Fomento de la Producción CORFO
Dirección General - MOPTT
INSTITUTO DE PREVISION SOCIAL
Servicio Agrícola y Ganadero
Dirección del Trabajo
Monto USD*
6,203,567
3,842,624
2,741,341
1,861,078
1,268,241
1,147,804
1,077,641
1,076,214
1,070,939
934,408
921,673
877,187
852,981
587,552
573,119
559,505
543,433
514,455
Cantidad OC*
32
101
57
43
126
27
9
154
19
17
263
29
13
2
145
23
55
30
497,350
441,757
402,895
384,550
371,637
24
7
12
87
9
Minimizing lock in risk
Through procurement policy
• IT neutrality principle
• Non discrimination principle through proprietary
formats use minimization
• Considering interoperability and portability
standards
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Working with trade associations
• Which is the position of Trade Associations?
• How do trade associations interests relate to this
issue?
• Are they able to help preventing this kind of
practice?
• Which actions do TA take against lock-in? if any
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
The role of anti trust authorities
In the TA guide (*) (August 2011) the FNE explicitly considers as a
risk:
• Fixation of technical standards
“[…] The settlement of technical standards by an TA can negatively
affect competition if it hampers the entrance of new competitors
[…]” (p. 29).
Furthermore, FNE imposes a view in which TA must take a positive
action, against non-competitive standards.
Conclusions
•
The total amount awarded through procedures that may reflect some kind of
lock in practices reach up to 14% for IT categories. Moreover, in some
subcategories like software, this percentage can go up to 30%.
•
For some vendors, direct awarding represents a significant proportion of their
contracting with the public sector. Oracle (99.9%), ESRI (89.9)%, SYNAPSIS
(86.3%), Microsoft (70.2%), EVERIS (57.8%) , ENTEL (52.7%).
•
In Chile, some actions have been taken from the procurement policy point of
view. Recently antitrust authorities have been taking part in the discussion as
well.
•
Trade associations’ interests are unclear, they could have a more active role in
this issue.
Diversification seems to a
fundamental strategy to reduce any
risk associated with this topic
Avoiding getting locked in by one
contractor or technology
Research Department