Afternoon Coffee: Probrand study shows margins paid for IT soared in pandemic; Coupa releases its Q2 2021 Business Spend Index; Colonial Pipeline exec shares why he paid ransom for cyberattack

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Probrand, a technology services provider, released a study that revealed margins being paid to IT suppliers soared to 50.84% during the Covid pandemic.

Analysis on $6.6 million of tech spend across 14 sectors before the first wave of Covid lockdowns showed that IT buyers paid a 9.4% margin on products on average. As supply and demand for work from home equipment rose, the average margin rose to 50.84%, the company said in a press release announcing its study.

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The Society of IT Managers recommends 3% as a best practice margin for IT purchases. Margins varied for different sectors. The most extreme cases were very high, such as a government organization paying a 1,456% margin on HDI cables, the Probrand study said.

“When we conduct spending reviews it’s not unusual to find some organizations paying way more than 3% over the trade price of the product — especially if they don’t have price monitoring tools in place,” Probrand’s Supply Chain Director, Ian Nethercot, said in the press release. “In recent years though, we’ve seen companies getting more savvy when it comes to restricting the margins paid to suppliers — and an average margin of 9.4% is historically low.”

Spend Matters plans to share more about the report’s findings. For now, visit the Probrand study “Technology Product Margins Report 2021” webpage for more information.

Coupa releases its Q2 2021 Business Spend Index, showing confidence improves

Last week, Coupa published findings from its Business Spend Index (BSI), Q2 2021 Outlook, showing that business confidence in spending is continuing to increase.

Coupa’s BSI is a predictive measure of business confidence that leverages insights from business spend data from Coupa clients. It found that business spend confidence increased to 91.4. The rate of improvement accelerated, suggesting US economic output is on path to return to “normal” levels in the coming months.

Data from this quarter also showed that some spending on goods or services related to in-person working increased — such as a 37.5% increase in business spending on air travel, a 20.5% increase in spend on office supplies, and a 9.4% increase in business spend on technology.

“It’s encouraging to see signs of optimism in the economic outlook after the precipitous drop at the start of the pandemic,” Jeff Collins, chief economist at Coupa, said in a press release. “However, a full rebound will take time given slower improvements in some sectors, such as healthcare, manufacturing, and high tech that were hit with labor shortages and supply chain disruptions. In the near term, we expect the economy to improve modestly, accelerating throughout Q2 2021 as Covid infection rates decline and vaccinations increase.”

Colonial Pipeline exec shares why he paid ransom for recent cyberattack

Joseph Blount, the CEO of the Colonial Pipeline Co., told the Wall Street Journal that he authorized ransom payment of $4.4 million because executives were unsure how badly a recent cyberattack had breached its systems.

The company also didn’t know how long it would take to bring the pipeline back. The pipeline supplies 45% of fuel for the US East Coast. A ransomware attack by a group called DarkSide led to the six-day shutdown. The disruption pushed gas prices to the highest levels in more than 6 ½ years and left thousands of gas stations without fuel, the article said.

“I know that’s a highly controversial decision,” Blount told the WSJ in his first public remarks since the hack. “I didn’t make it lightly. I will admit that I wasn’t comfortable seeing money go out the door to people like this.”

“But it was the right thing to do for the country,” he added.

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