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IT Purchasing Excellence in the Era of Digital Sourcing Transformation
IT purchasing has evolved. Has your IT procurement process?
IT Purchasing Excellence for Digital Transformation
The industry has moved from traditional procurement methods to a more dynamic and data-driven approach. In the past, buyers were typically at a significant disadvantage. For example, sellers held all the cards when it came to market pricing. Buyers were often in the dark and as a result, overpaid significantly.
Purchasing excellence is simply difficult to achieve — or even know if you achieved it. NPI analyzed more than $60 billion in IT spending at large enterprises in the last year alone and found that just 11% of the deals were at fair market value.
Yet, IT procurement is an essential part of driving digital transformation for enterprises. An effective IT procurement strategy helps you leverage the power of technology to drive innovation and improve operations.
Best Practices for Achieving Purchasing Excellence in IT
The approach to IT purchasing differs across companies. In sectors heavily reliant on IT, such as financial services, there might be a specialized IT sourcing team reporting to IT or finance. In other organizations, IT staff without formal procurement training may handle purchasing for a wide variety of services, including telecom and broadband.
Alternatively, IT buying might fall under general indirect sourcing, which can lead to friction with IT departments. Regardless of how IT sourcing is structured, many departments independently purchase their own SaaS or cloud subscription, leading to decentralized and often unmanaged spending.
You need a sourcing transformation to rein in costs.
Here are a few best practices that can make a big difference in helping you achieve IT purchasing excellence.
Vendor Management Strategies
A couple of key strategies for working with vendors include:
- Building strategic partnerships with key vendors can lead to better pricing, especially if you can consolidate purchasing to leverage volume discounts. It can also produce innovative solutions that fit your unique needs.
- Leveraging market intelligence and spend analytics is critical to ensure you get optimal pricing and don’t overspend.
- Evaluating vendor performance against agreed-upon metrics ensures they meet your needs.
Cost Optimization Techniques
In IT purchase evaluation, you need to stay focused on the total cost of ownership (TCO). It’s easy to be swayed by a low initial cost without considering the long-term impact. Uncapped renewal increases, support costs, add-ons, and upgrades all add up.
Overbuying is common, especially in SaaS procurement. Does everyone in your organization need the most powerful and comprehensive license types? Right-sizing your subscriptions based on roles and needs can significantly reduce your IT spend.
IT procurement consulting services and regular contract review can help uncover additional cost savings opportunities, especially at renewal time.
Quality Assurance Measures
Once IT purchases are completed, procurement teams often move on to the next project. However, it’s important to define the quality standards and performance metrics for your purchases and then monitor them.
Periodic reviews of performance and quality with your team members can help identify any shortcomings. A regular dialogue with your vendors — especially if you find issues — is key to maximizing value.
Evaluating Digital Sourcing Tools and Technologies
Buyers are using digital sourcing tools more frequently than ever. Automating purchasing processes using eProcurement platforms, for example, can reduce the administrative burden. However, this may not result in the best deal if you don’t have the necessary market intel. External data and intelligence from category experts can drive considerable cost reductions — but only if you really know what makes up fair-market pricing.
Consider the use of procurement tools and solutions that are purpose-built for the IT spend category. These solutions are uniquely designed to help IT sourcing overcome challenges specific to tech buying, like renewal planning and stakeholder alignment, while also integrating external pricing and vendor negotiation intelligence.
Key Metrics to Measure the Success of Sourcing Transformation
As you change your procurement approach, how do you know if your sourcing transformation is working? Check the numbers.
Key metrics to measure include:
- Cost savings: Measure the reduction in costs achieved through strategic sourcing and negotiations.
- Vendor performance: Evaluate vendors based on reliability, delivery times, quality of products, services, and responsiveness.
- Process efficiency: Assess the time it takes to complete procurement cycles and efficiency gains.
This requires a greater level of transparency than many companies have, even those that have multi-million-dollar procurement budgets. You need granular visibility into your IT spend across departments and categories to optimize spending and prevent overspending.
Challenges and Benefits in IT Purchasing for Digital Transformation
With digital transformation continuing, IT procurement has never been more critical than it is right now. Yet, there are tremendous resource constraints in the mix from personnel to budgets to time. It’s challenging to be strategic when you’re under pressure to get things done.
On top of that, there’s an ever-expanding volume of IT hardware, software, and subscription options available. NPI clients purchased from 600+ new vendors in the past year — the highest number we’ve seen in two decades.
It’s a significant challenge just to stay on top of everything.
However, there are some big benefits to digital sourcing, including:
- Increased efficiency
- Enhanced visibility
- Supplier relationship management
- Agility to adapt to changing market conditions
With the right partner maximizing the effectiveness of your IT sourcing and the IT procurement resources you need, you can optimize your processes and improve your ROI.
Future Trends in Digital Sourcing and IT Purchasing
Gartner projects that spending on IT globally will grow 9.8% in 2025. At the same time, procurement teams are being more aggressive in how they work with vendors.
Here’s an example. Vendors are famous for delaying quotes until the last minute, forcing fast decisions. Some organizations are now adding contract language requiring itemized quotes six months in advance — creating better visibility and competitive leverage. Other trends include licensing flexibility, specifically reallocation of licenses, and pushing back on price increases that don’t deliver significant value.
In the future, AI and data analysis will play an even bigger role in sourcing transformation, providing deeper insight into spending patterns and categories, and helping avoid overspending.
Achieving Excellence in IT Purchasing for a Digital Future
When you consider that more than 85% of companies are overspending on IT and telecom, IT purchasing excellence is not just an exercise. It can result in multi-million-dollar cost reductions.
As the tech environment continues to evolve, procurement teams need to hone their strategic approach to procurement and renewals. NPI provides market intelligence and deep insight into IT categories and vendors, analyzing billions of dollars of actual spend, to help you right-size deals and optimize costs. We provide you with actionable, transaction-specific information that eliminates your blind spots so you can craft better deals.
Talk to the IT procurement experts at NPI today to see how we can help you achieve IT purchasing excellence.
