As an assignment for my MBA B2B Marketing Course, I was involved with a project to make a case for private and public sector corporations to procure ICT services locally, as opposed to outside of the region. The idea was that we would take a closer look at some of the impacts of doing so, to make not only an ‘economic argument’, but a ‘social argument’ as well, for the merits of taking such an approach.
At a high level, the argument is centered around such things as how when governments and corporations procure services (IT or otherwise) from organizations based in the region, the firms and their employees alike contribute to the tax base as well as the economy and society as a whole. While this may sound simple enough, when you have procurement departments that are accustomed (or perhaps even mandated) to making purchasing decisions solely (or even largely) on the basis on lowest cost – without taking a ‘total cost of ownership’ approach – it’s easier said than done.
In putting together the buy local value proposition – taking into account both economic as well as social factors – we were able to make some extrapolations of our own for the benefits of buying local based on some multiplier effects and assumptions from similar studies. We also took a look at some of the strategies and best practices being taken by global leaders in ICT such as Finland and Iceland; nations that have grown their ICT sectors significantly through such strategies as commitments to R&D investments, education, entrepreneurship and ICT exports – among other things. In doing so we were able to build upon some great work already being done by the New Brunswick Information Technology Council (NBITC) to make some recommendations for how to drive economic development through a strengthened local ICT sector, where a ‘buy local’ strategy could be a key pillar.
Here is an article from one of co-sponsors of the project, Larry Sampson of the NBITC that ran in the Telegraph Journal (local newspaper) on July 22nd, that was subsequently posted on the University blog where I retrieved it from, where he references the project as well as a few specifics related to my group.
The Need to Buy Local
New Brunswick Telegraph-Journal Mon Jul 22 2013 Page: B1 Section: B Byline: Larry Sampson Telegraph-journal
Early last week I was fortunate enough to sit in on the final presentations of the MBA business to business marketing class at UNBSJ. The teams (there were seven in total) had spent the bulk of the last few months trying to determine if it made more sense for government to purchase information technology goods and services from businesses owned and operated in New Brunswick (local), or those who operated here, but were owned elsewhere (non-local). Assuming we’re talking equivalent quality and price, you wouldn’t think there’d be much distinction between the two – both types of businesses employ people in the province, buy goods and services locally, and are active in the community – but apparently there is.
In addition to being struck by the professional level of many of the presentations and the insights they provided, it was clear this was a group of smart, passionate people with a global perspective. There were students from Europe, Asia, and North America – most of whom were “from away” – and many of whom had prior real world experience.
As you might expect there was considerable variation between the team presentations, however a number of consistent themes emerged. All the teams saw ICT as a significant means of growing the economy. The current low levels of investment in research and development by government and the private sector were viewed both as a weakness and opportunity. Multiple teams pointed out the incongruity between government trying to develop the economy on one hand, while ignoring the potential to leverage its own procurement to that end on the other. The need to better equip our education system to foster entrepreneurs and grow the supply of ICT-related talent was also regularly cited, as was the potential for ICT to improve the competitiveness of our more traditional economic sectors.
Every single team suggested there would be a significant financial and social advantage to New Brunswick should government introduce a formal “Buy Local” policy. Many of the teams backed this up with a detailed analysis showing how buying locally keeps more of the money in the province, generates increased government revenue, and produces more jobs. In addition to modelling the financial impact themselves (one team assessed the net economic impact was over 2:1 in favour of local purchasing), teams quoted from a number of Canadian and American studies. These studies found every $100 spent “non-locally” results in $30 to $54 more leaving that economy than if the same $100 was spent with a local firm. On the social side, local businesses gave back $5 to the community for every $1 provided by a multinational.
One of the more recent studies cited was The Power of Purchasing: The Economic Impacts of Local Procurement – a study that was completed this May by the Columbia Institute, LOCO, and the ISIS Research Centre in the Sauder School of Business at UBC. It concluded that local firms recirculate nearly double the amount of revenue when compared to multinationals, and create almost twice as many jobs per dollar of revenue.
When asked why we weren’t doing a better job of leveraging local companies to grow the provincial economy, the teams offered a number of explanations, including: government hasn’t done the math or seen the opportunity; the ICT sector is doing a lousy job of educating government; there is no champion/owner inside of government; and government procurement is fixated on reducing cost to the detriment of the big picture.
Assuming these students have gotten it even vaguely right, there’s an awful lot of smoke here for there not to be a fire.
Larry Sampson is the CEO of the New Brunswick Information Technology Council.
© 2013 Telegraph-Journal (New Brunswick)”