IT spending is on the rise. Through 2019, 89% of organizations expect their budget to either match or exceed the previous years’ spend level – making IT sourcing and procurement essential to enterprises everywhere.
However, the industry is changing and evolving. How you’ve traditionally approached IT purchases may no longer work – and two primary shifts are responsible.
Two Trends Shaping Today’s IT Sourcing & Procurement
Digitalization of IT
Digital transformation and the technologies involved in these advanced initiatives are creating tremendous business value, but they’re also raising the potential for purchase process risks. These innovations not only require new decisions to be made, but are inspiring never-before-seen IT vendor behaviors as well as customer-side investments and tactics.
Subscription and as-a-Service models are another side effect of this trend – these purchasing options are exploding in popularity across the global IT sourcing and procurement scene. However, they present unique challenges where tracking licenses, renewals, and overall spend is concerned that requires specialized expertise to overcome.
Thanks to this digitalization shift, externalization is also making its mark on the IT purchasing industry. Since technology has eliminated a bulk of the sourcing and procurement burden from these teams’ shoulders, organizations have more time than ever to assess strategic sourcing capabilities and manage outsourced, third-party providers.
While finding and implementing external solutions is nothing new for IT sourcing and procurement, few have dedicated resources to manage ongoing processes and drive continuous business value – but that’s quickly changing. The enterprises that embrace externalization with long-term strategies are experiencing reduced lifetime costs per initiative, more accountable partnerships, and an increased likelihood of milestones being met on-time.
IT Sourcing & Procurement Challenges
If you’re an IT buyer, the market is stacked against you in many ways – pricing disparity is rampant (even among similar products/services), making it more difficult than ever to compare offers to find the best deal. Compounding that challenge is the evolution of today’s vendor offerings and product licensing models. No wonder few IT sourcing and procurement teams struggle to keep up!
But the difficulties don’t stop there. Inadequate business alignment, unprepared negotiation initiatives, and increasing pressure to get a deal done once stakeholders have made their decision all have the potential to derail a project’s ultimate success separately. When combined, these tasks can be almost impossible to complete.
To overcome these obstacles, it’s paramount you take advantage of digitalization and externalization to create opportunities for IT sourcing and procurement business alignment. While historically the focus has been standardizing purchase processes and saving money, today’s organizations are using IT sourcing and procurement efforts as a revenue generation tool that creates long-term business value.
Overcoming Your Obstacles
To make the most of your sourcing and procurement teams moving forward, consider three important questions before making any purchase decision:
- Are you paying too much?
- Are you buying the solution you need?
- If the answer to either question is no, how do you negotiate to change that?
The easiest way to solve all three challenges is by integrating purchase processes with strategic business planning and budgeting from the context of an end-to-end lifecycle framework. This not only ensures better alignment between technology management initiatives and organizational growth priorities, but also prevents up to 15% of money spent on suppliers being wasted as the result of ‘use it or lose it’ budgeting.
An end-to-end sourcing and procurement lifecycle also gives you the best chance to prevent shadow spend and scope creep throughout these projects. By understanding costs and communicating enterprise needs as early as possible in the process, you’re far better prepared to eliminate unnecessary expenses and identify critical line-item details – enabling you to optimize the investment’s impact and understand where your budget risks truly lie.
In addition to a comprehensive IT sourcing and procurement lifecycle, here are three best practices you can use to eliminate complexity and create immediately visible business results:
Small daily purchases add up to significant totals over months and years. It’s important you’re not spending any more to satisfy these needs than necessary. By conducting price benchmark analyses regularly, you can identify exactly where and when overspend is occurring to curb bad behaviors before they sink your long-term budget.
If you want IT’s best partners and solutions, your sourcing and procurement professionals have to be industry experts. Use specific, in-depth research wherever possible to better inform your processes – and make it a priority to continuously update this knowledge. As quickly as things are changing in IT, what works best today may not be your best fit weeks or months from now.
Every IT vendor is different, and your negotiation tactics need to take this into account. Deep intelligence can be a powerful tool in not only identifying ideal solutions, but in reducing costs and mitigating risks. You should know how a partner thinks and what their strategy is before their product or service is integrated.
Want to learn everything else you need to be an IT sourcing and procurement expert? Sign up to earn AOTMP® University’s Sourcing & Procurement Specialty Certification today!