A cost-savings and efficiency initiative begun by President Lawrence H. Summers has begun to bear fruit in the first University-wide preferred provider program, which would save a projected $2 million to $3 million annually.
The program offers significant discounts on personal computers, laptops, and peripherals bought through computer giant IBM, which was named the University’s preferred provider in November.
The new program is part of a broader thrust by Summers to increase cooperation and realize savings across the University. The effort, he said, is aimed at both increasing the sense of a broader “Harvard” identity and at making the University run more smoothly through standardized systems, group purchasing, and other University-wide initiatives.
Summers said finding savings and efficiencies in the University’s day-to-day operations helps preserve resources for Harvard’s core research and teaching activities.
“We should be trying to achieve world-class efficiency in these nonacademic areas of what the University does,” Summers said.
The computer purchasing program, developed in collaboration with Harvard’s different Schools, stems from a report by McKinsey & Co. management consultants. The report said potential savings of between $17 million and $31 million could be realized by pooling purchases from Harvard’s Schools on information technology, printing services, and construction.
Summers said that he asked McKinsey to come to Harvard knowing that the University was entering difficult economic times. With only about 5 percent of the endowment spent each year, Summers said that saving money would be a more effective way to ease the fiscal strain than raising endowment contributions. In effect, he said, saving $1 million is easier than raising $20 million.
“Every million dollars a year you save is equal to $20 million more in endowment, so it’s a very high leverage activity for the University to realize these economies,” Summers said. “And it’s very important to tuition-paying students as well as supporters of the University that we be as effective as we can in our management functions.”
McKinsey found that, overall, Harvard does a good job finding bargains in the nearly $1 billion in goods and services it buys each year. It singled out purchasing of office supplies, scientific supplies, and temporary help as areas where Harvard does a good job. It also found, however, that the University could save more by pooling purchases in some other areas.
Summers said he expects the computer-purchasing program to attract between 75 percent and 90 percent of the University’s overall purchases on computers and peripherals.
IBM was selected as the preferred vendor for the program because it offered the best price in a program that encompasses all parts of the University. In addition, Harvard’s Information Technology professionals felt that partnering with a technology company with as many resources as IBM would provide the opportunity for the development of other savings programs in the future.
The University and IBM signed a letter of understanding last November and a Web site for administrators to make purchases was available in January. A site on which students can make purchases is slated to be online by the beginning of April.
The student program offers discounts averaging $300 to $400, with a T30 laptop, for example, going for $1,283 through the program compared with $2,174 retail. An IBM Netvista desktop, which retails for $1,360, would be available for $806.
The partnership allows for more than just financial efficiencies. The program offers 24-hour ordering online, a 24-hour call center for ordering and shipping support, direct shipping, special student configurations, and same-day pickup during a fall rush period.
Harvard Vice President of Finance Ann Berman said the personal computer program is just the first of what will be several new University-wide initiatives aimed at saving money through large group purchasing. Berman said there were currently no plans for a mandatory centralized purchasing program, which she said would simply create unnecessary administrative costs without bringing added benefits.
“PC procurement is the first piece and we hope in the next year there’ll be more,” Berman said.