Whitepaper A Guide to AWS Contract and Cost Optimization Mar 5, 2025AWS, Cloud Download the White Paper Download My Copy Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Multiple inflection points over the last several years have fundamentally changed enterprises’ appetites for cloud infrastructure services. The increase in demand driven by digital transformation initiatives was bolstered by COVID-19, which added new urgency and shifts in business behavior. Along the way, generative AI has emerged from the background to become one of the most disruptive and game-changing advancements in enterprise IT. AWS continues to dominate the hyperscaler market, capturing one-third of total spending.1 Revenues are expected to jump higher in the near-term as companies bring new AI workloads to the cloud and alliances between AI model makers and cloud providers drive higher customer spend. Many enterprises are already feeling the pressure to choose between using a single hyperscaler’s AI ecosystem at a potentially lower cost or a multi-provider strategy that mitigates the risks of vendor lock-in. Higher Cloud Spend Reveals Cost Management Vulnerabilities As enterprises spend more on cloud, particularly with market leaders like AWS, most are discovering they are ill-prepared to manage surging cloud costs. Many companies have seen their cloud spend grow by as much as 20 or 30% per year without the traction of AI.2 It’s become alarmingly clear most cloud cost governance processes and tactics are still too immature, decentralized, and unfocused. There is an urgent need among enterprise IT and tech procurement leaders to improve how cloud costs are managed and contained. Growing demand for cloud services is driving faster purchasing cycles as well as shadow spend that doesn’t leverage existing hyperscaler commitments. There is also the issue of compliance, where product use rights for certain products are often affected by which hyperscaler is running the workload. In this guide, we reveal what large enterprise AWS customers need to do to eliminate the risk of cloud overspending and improve cost containment as their cloud commitments grow. 1 https://www.srgresearch.com/articles/quarterly-cloud-market-once-again-grows-by-10-billion-from-2022-meanwhile-little-change-at-the-top 2 https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/more-for-less-five-ways-to-lower-cloud-costs-without-destroying-value The Most Common Mistake in Cloud Cost Management Historically, enterprise cloud cost governance strategies have focused heavily on one activity – service optimization. When performed effectively, service optimization can yield savings in the 10 to 25% range. Typical tactics include: Identify and remove unused or underutilized resources Right-size resources according to current and future-state workload requirements Choose best-fit pricing models (e.g. spot vs. reserved instances, savings plans, etc.) Analyze spend to identify cost-saving opportunities and assist with demand forecasting While service optimization usually has the potential to reveal the greatest opportunity for savings, companies often leave significant dollars on the table by not performing it optimally or regularly. Another area of focus is compliance monitoring. It includes tasks like invoice auditing to identify and remediate billing errors, as well as ensuring adherence to agreed-upon discounts and incentives. Compliance monitoring is resource-intensive and typically delivers savings that are materially less than service optimization. For many enterprises, cloud cost governance stops with service optimization and compliance monitoring – and that’s a serious mistake. The Importance of Contract Optimization One overlooked area of cloud cost control is contract optimization. It’s essentially the first step in an effective cloud cost governance strategy and includes the optimization of pricing, discounts, credits, incentives, and business terms. It ensures the customer spends the lowest amount possible from day one of their commitment with AWS and amplifies savings in other areas of cloud governance (including service optimization and compliance monitoring). Hard-dollar savings can be material and there are several soft-dollar benefits as well (e.g. reduced migration and training costs). Failure to perform cloud contract optimization is one of the biggest mistakes in cloud cost governance – and one more way companies leave money on the table during the contracting process. AWS Cloud Contract Optimization – Focus on These Contractual Elements With the potential to eliminate millions of dollars of cloud overspend, why do companies overlook cloud contract optimization? The short answers are resource constraints and internal expertise. IT and IT procurement teams have been overstretched, and many lack detailed familiarity with AWS’s current contractual elements and the degree to which they can be negotiated. Some organizations have invested in FinOps – an evolving cloud financial management discipline – but these efforts are still relatively nascent. To move the needle on cloud cost management and containment with AWS, enterprises need to understand key contractual elements and how they can be leveraged for savings. Maximize Your Cloud Potential with AWS – Not Your Spend As large enterprises pursue growth and innovation, AWS will continue to be an indispensable and trusted partner. Customer spend on AWS services will likely skyrocket over the next decade as a result. This serves as a wake-up call to companies who have taken a less-than-rigorous approach to cloud cost management. Now is the time to understand how and where costs can be optimized for savings, and to prioritize related activities accordingly. For AWS customers, contract optimization is foundational to cloud cost containment. Knowing which contractual elements to focus on during negotiations and how to leverage them effectively can deliver material savings. If you’re interested in optimizing your cloud contract for savings and flexibility, NPI can help. Failure to perform cloud contract optimization is one of the biggest mistakes in cloud cost governance – and one more way companies leave money on the table during the contracting process. Download the White Paper Download My Copy Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Tackling Vendor Aggressiveness: Insights from NPI’s Client Advisory Board Mar 4, 2025Application Rationalization, Audit Defense, Contract Negotiation, Price Benchmarking Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. In today’s economic climate, technology vendors are more aggressive than ever, prioritizing margin expansion over customer collaboration. At NPI’s recent Client Advisory Board (CAB) meeting, industry leaders shared strategies for navigating tough vendor negotiations, managing audit risks, and optimizing application portfolios. Our CAB comprises IT procurement executives from some of the most well-known brands in the world – they are on the leading edge of large enterprise IT procurement excellence. Here are the key takeaways from our discussion. Vendors Are “Going to War” – Here’s How to Push Back With mounting economic pressures, many technology vendors are adopting a “going to war” mindset – favoring aggressive sales tactics over customer partnership. Organizations must buy only what they need and fully utilize purchased licenses to counter vendor-driven price hikes. Early planning is key. Our CAB members say they are starting negotiations much earlier, in part to send signals to the vendor that other solutions are under serious consideration (whether they are or not…). Companies that start renewal negotiations 12 to 18 months in advance can take control of the process instead of ceding the reins to the vendors (who will typically delay). Proactive engagement gives organizations leverage to secure better pricing and contract terms. How to Handle Aggressive Vendors When facing strong-arm tactics, organizations can use internal escalation and external visibility as leverage. For example, senior leadership involvement can shift the negotiation dynamic and force vendors to reconsider aggressive terms. Also, public relations risks (such as exposing unfavorable vendor practices) can be used strategically to push back. However, smaller companies lack the bargaining power of industry giants, making early strategy development even more critical. Identifying revenue-driven pressure tactics early and rejecting them outright prevents unnecessary cost increases. The Impact of Private Equity on Vendor Pricing Private Equity (PE) ownership adds another layer of complexity. PE-backed vendors are notorious for aggressive price hikes and rigid contract terms, especially as they move through different investment stages. Customers working with these vendors should expect minimal pricing flexibility and take a long-term approach to mitigating cost increases. Software Audits: A Growing Risk Major vendors like Oracle, SAP, and even cloud providers are ramping up audits to extract additional revenue. Audit penalties are rarely avoidable, as vendors rely on complex use rights and customer confusion to uncover compliance gaps. The best way to minimize risk? Proactive software asset management and routine license position assessment. Organizations should regularly review their entitlements, track actual usage, and maintain clear documentation to ensure compliance before an audit even begins. Application Rationalization & Vendor Consolidation Strategies Consolidating buying power by eliminating some overlapping technologies can be a powerful cost-saving tactic. And if you really pull the trigger, it has the added benefit of reducing the number of vendors to be managed. Note: reducing the number of vendors was a common objective across our CAB, largely driven by cost and risk management goals. Suggested tactics include: The threat of RFPs to push vendors into more competitive pricing. Early IT involvement (up to two years in advance) to drive negotiation leverage. Research your portfolio and identify overlaps – whether you implement the application rationalization or not, skillful use of this information will drive savings. Tell the vendor early-on that you are considering alternatives. Breaking down vendor offerings into individual components to introduce competitive pressure. Some companies are taking bolder action, such as replacing Salesforce with Microsoft Dynamics, as a means to optimize costs and align with long-term IT strategies. Vendor evaluation tools that map products to alternative solutions have also proven valuable in streamlining rationalization efforts. Stay Proactive, Not Reactive The peer insights shared during our Client Advisory Board meeting reinforce a critical truth: IT vendor relationships must be managed strategically, not passively. Companies that plan ahead, stay vigilant against aggressive pricing tactics, and explore vendor consolidation opportunities will be in the best position to control IT costs and secure better contract terms. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Microsoft EAs: Are They Going Away? Feb 26, 2025Microsoft Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Microsoft’s latest move to phase out Enterprise Agreements (EA) for certain Level A customers (500–2,399 users/devices) has left many wondering: Are EAs going away altogether? Like many things related to Microsoft enterprise buying, the answer is a little murky. Below is a quick overview of what we know, what we’re seeing now, and where we see things heading. If you want a deeper dive, check out our bulletin on the topic. What’s Changing? Starting January 1, 2025, Microsoft will stop renewing a small percentage of Cloud EAs in direct markets. The exact definition of “Cloud EA” remains unclear, but it likely refers to EAs that include only Online Services and Azure excluding on-premises licenses, special amendments, or discounts. Additionally, Microsoft is encouraging Level A customers to transition to the Microsoft Customer Agreement for Enterprise (MCA-E) or the Cloud Solution Provider (CSP) program. Unlike EAs, MCA-E eliminates price bands, Software Assurance benefits, and renewal discounts. Will Large Enterprises Be Forced Off EAs in 2025? So far, we haven’t seen Microsoft force large enterprise customers off their EAs. However, reports indicate that some resellers have been instructed not to provide EA renewal quotes to Level A customers, instead directing them toward alternative licensing models. While a full EA sunset in 2025 seems unlikely, Microsoft has built flexibility into its agreements that could allow for major changes. If the vendor starts enforcing clauses requiring customers to enter new agreements upon renewal, this could spark contract disputes and significant cost increases. What EA Customers Need to Watch For Pricing & Discounts Will Change: Some customers may see lower costs under MCA-E, especially those with fluctuating licensing needs. Others may lose valuable EA discounts, particularly for on-premises products with Software Assurance (SA). Licensing Complexity May Increase: MCA-E simplifies contracts but removes key licensing benefits such as SA renewals for Windows Server and SQL Server. Customers may need to combine multiple licensing programs to replicate their EA benefits, adding complexity and costs. Microsoft 365 customers could face challenges, particularly with Teams licensing, which may require a separate purchase. Contract & Purchase Processes Will Be Different: MCA-E introduces shorter contracts (9 pages vs. 30+ pages for EA) and automatic renewals. Customers might need to manage multiple resellers to maintain similar coverage, potentially leading to higher costs. What Should Enterprise Customers Do? While Microsoft’s push to phase out EAs for Level A customers doesn’t yet impact larger enterprises, it could be a sign of bigger changes ahead. Organizations relying on EAs must now prepare for what’s next. Customers should: Closely monitor Microsoft’s licensing policies and how they evolve. Evaluate alternative licensing models to understand potential cost impacts. Engage with licensing experts to ensure they maintain the best possible terms. We’ll be tracking these changes closely. To stay informed, register for one of our upcoming Microsoft Licensing webinars or contact us. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Microsoft Security Copilot: Costs and Considerations Feb 21, 2025Microsoft Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. In an age where cyberattacks occur over 4,000 times per second globally, the need for advanced, AI-driven security tools has never been more urgent. Microsoft’s Security Copilot, is a generative AI-powered security solution that promises to transform the way organizations defend against cyber threats. Designed to operate at machine speed and scale, Security Copilot aims to enhance the efficiency and capabilities of security professionals by offering a natural language, assistive experience. With ChatGPT and Copilot-like chat sessions, admins can fetch information from a variety of systems as they investigate and respond to incidents, as well as manage posture and communicate with their internal stakeholders. Given the complexity of enterprise-grade cybersecurity infrastructures, there is strong value in the simplification that Microsoft is delivering. Why Consider Security Copilot? The cybersecurity landscape has grown increasingly perilous. Microsoft reports a staggering rise in password attacks, from 579 per second to over 4,000 per second in just two years. Additionally, the global cost of cybercrime is projected to skyrocket from $3 trillion in 2015 to $10.5 trillion by 2025. Despite deploying an average of 80 security tools, organizations struggle with data overload, alert exhaustion, and limited visibility across solutions. By leveraging over 78 trillion security signals processed daily by Microsoft, Security Copilot delivers tailored insights and guidance to users. This empowers customers to defend against sophisticated threats at AI-driven scale and speed. Key Features of Microsoft Security Copilot Natural Language Interaction: Users can interact with security data and tools using conversational language, simplifying complex operations and making cybersecurity more accessible. Integration with Microsoft Security Products: Seamlessly integrates with tools like Microsoft Defender XDR, Microsoft Sentinel, Microsoft Intune, and Microsoft Entra to provide a unified security experience. Access to Global Threat Intelligence: Processes over 78 trillion security signals daily to offer up-to-date insights and guidance for better decision-making. Incident Investigation and Response: Provides step-by-step guidance for investigating and mitigating threats, enabling swift and effective responses. Script Analysis and Query Building: Translates complex scripts and queries into natural language, allowing security teams to perform technical tasks without requiring advanced programming expertise. Understanding the Costs Microsoft has introduced a new licensing model based on a metric called Security Compute Unit (SCU). An SCU quantifies the Azure compute capacity required for running Security Copilot, similar to other Azure services like virtual machines. See the Azure Pricing Calculator for more details: SCU Pricing Hourly Cost: $4 per SCU Monthly Cost: $2,920 per SCU Annual Cost: Approximately $35,000 per SCU Microsoft recommends starting with a minimum of three SCUs for evaluation purposes, bringing the annual cost to just over $105,000. To ensure optimal performance and cost management, Microsoft provides monitoring tools to track SCU consumption. Organizations can also count this consumption toward any Microsoft Azure Consumption Commitment (MACC) agreements. It’s worth noting that underestimating Azure requirements can lead to performance issues, while overestimating can inflate costs. Additionally, for large enterprises in particular, the SCU pricing model can get really expensive, really quickly. Final Thoughts As cyber threats grow more sophisticated, tools like Microsoft Security Copilot represent a solid evolution in the enterprise cybersecurity landscape. Speed, simplification, and responsiveness are critical to staying ahead of threats, and AI has the potential to deliver transformative value in each of these areas. But, in the grand scheme, Microsoft’s AI capabilities are still nascent. As one reviewer put it, “Will this product revolutionize Security Operations completely right now? Probably not. Could it assist a security admin when solving an incident? In my opinion, absolutely.” Historically, there is a short window for dealmaking with Microsoft as they try to accelerate adoption of new products across their enterprise customer base. Customers looking to take advantage of that window should carefully assess Security Copilot’s pricing structure in relation to their specific needs and budget. It’s advisable to conduct a thorough cost-benefit analysis and consider trialing the service to determine its value within your organization’s context. Staying on top of changes to Microsoft’s offerings, licensing and pricing is tough – especially for large enterprises with sprawling Microsoft estates. NPI can help. Contact us. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Webinars SIG: VMware Renewal Best Practices for 2025 Feb 19, 2025VMware Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Since Broadcom’s acquisition, VMware renewals have become ground zero for radical cost increases. In this session, SAM expert and advisor to the Fortune 500, share best practices on how IT sourcing practitioners can mitigate and minimize VMware renewal cost increases. You’ll learn: In-the-trenches perspectives on what VMware customers are experiencing post-acquisitionHow sweeping changes to VMware licensing and pricing is affecting every aspect of the VMware renewal processProven tactics to help you strategically and effectively prepare for VMware renewal events Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Bulletin Microsoft End of Support Update 2025 – Which Products are Up Next and How to Prepare Feb 5, 2025Microsoft Download PDF Download My Copy Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. In 2025, approximately 120 Microsoft offerings will reach end of support or servicing, transition to Extended Support, or be retired – including certain Azure functionalities. For enterprise customers, this means critical decisions must be made: upgrade to supported versions or continue using unsupported products at their own risk. In this bulletin, we outline the products slated for sunset in 2025 and key considerations for Microsoft customers as they prepare for these changes. The scope of these retirements is significant, with around 50% of the affected offerings tied to Azure. Once these products reach end of support, Microsoft will no longer provide security updates, non-security updates, free or paid assisted support, or online technical content updates – potentially leaving organizations exposed to operational and security risks. Below is the current list of Microsoft offerings scheduled for retirement or end of servicing/support in 2025: Product Retirements Governed by Microsoft’s Modern PolicyRetirement DateMicrosoft GenomicsJanuary 6, 2025Visual Studio App CenterMarch 31, 2025SAP HANA Large Instances (HLIs)June 30, 2025Azure Database for MariaDBSeptember 19, 2025Azure Basic Load BalancerSeptember 30, 2025Azure HPC CacheSeptember 30, 2025Azure Remote RenderingSeptember 30, 2025Azure Service MapOctober 14, 2025Azure SQL EdgeOctober 14, 2025Azure Unmanaged DisksOctober 14, 2025Azure vFXTOctober 14, 2025Windows 10 Enterprise and EducationOctober 14, 2025Windows 10 Home and ProOctober 14, 2025Windows 10 IoT EnterpriseOctober 14, 2025 Product Retirements Governed by Microsoft’s Modern PolicyRetirement DateMicrosoft GenomicsJanuary 6, 2025Visual Studio App CenterMarch 31, 2025SAP HANA Large Instances (HLIs)June 30, 2025Azure Database for MariaDBSeptember 19, 2025Azure Basic Load BalancerSeptember 30, 2025Azure HPC CacheSeptember 30, 2025Azure Remote RenderingSeptember 30, 2025Azure Service MapSeptember 30, 2025Azure SQL EdgeSeptember 30, 2025Azure Unmanaged DisksSeptember 30, 2025Azure vFXTSeptember 30, 2025Windows 10 Enterprise and EducationOctober 14, 2025Windows 10 Home and ProOctober 14, 2025Windows 10 IoT EnterpriseOctober 14, 2025 End of Servicing: Governed by Microsoft’s Modern PolicyEnd of Servicing DateDynamics 365 Business Central on-premises (Modern Policy), 2023 release wave 2, version 23.xApril 2, 2025Microsoft Configuration Manager, Version 2309April 9, 2025Dynamics 365 Business Central on-premises (Modern Policy), 2024 release wave 1, version 24.xOctober 7, 2025Windows 11 Enterprise and Education, Version 22H2October 14, 2025Windows 11 IoT Enterprise, Version 22H2October 14, 2025Microsoft Configuration Manager, Version 2403October 22, 2025Windows Server Annual Channel, Version 23H2October 24, 2025Windows 11 Home and Pro, Version 23H2November 11, 2025 Products Reaching End of Support: Governed by Microsoft’s Fixed PolicyEnd of Support DateDynamics C5 2015January 14, 2025Dynamics CRM 2015January 14, 2025Dynamics NAV 2015January 14, 2025Dynamics SL 2015January 14, 2025Visual Studio 2022 , Version 17.6 (LTSC channel)January 14, 2025Dynamics GP 2015April 8, 2025Dynamics GP 2015 R2April 8, 2025Microsoft SQL Server 2012, Extended Security Update Year 3July 8, 2025SQL Server 2014, Extended Security Updates Year 1July 8, 2025Visual Studio 2022 , Version 17.8 (LTSC channel)July 8, 2025Access 2016October 14, 2025Access 2019October 14, 2025Dynamics 365 Business Central on-premises (Fixed Policy)October 14, 2025Excel 2016October 14, 2025Excel 2019October 14, 2025Exchange Server 2016October 14, 2025Exchange Server 2019October 14, 2025Microsoft Office 2016October 14, 2025Microsoft Office 2019October 14, 2025Microsoft Report Viewer 2015 RuntimeOctober 14, 2025OneNote 2016October 14, 2025Outlook 2016October 14, 2025Outlook 2019October 14, 2025PowerPoint 2016October 14, 2025PowerPoint 2019October 14, 2025Project 2016October 14, 2025Project 2019October 14, 2025Publisher 2016October 14, 2025Publisher 2019October 14, 2025 Microsoft is also moving several products from Mainstream to Extended Support in 2025. Per Microsoft, Extended Support includes security updates at no cost, and paid non-security updates and support. Once a product is in Extended Support phase, Microsoft does not accept requests for design changes or new features. Products Moving to Extended SupportEnd of Mainstream SupportSQL Server 2019February 28, 2025 Products Moving to Extended SupportEnd of Mainstream SupportAzure DevOps Server 2020October 14, 2025Microsoft RoboticsOctober 14, 2025 Preparing for End of Support Microsoft customers have limited options when a product reaches end of support – upgrade to the latest cloud or on-premise version of that product, remain on the existing version and absorb the business risk, or (if eligible) enroll in Microsoft’s Extended Security Update Program. As customers navigate this decision, they should ask the following questions: What is the cost to upgrade? Does an upgrade align with the organization’s internal IT roadmap? Remember, Microsoft is highly motivated to move customers to the newest versions of their offerings. In many cases, the deal window is open for customers that decide to make the move. But customer readiness is key and there are technical environment factors that add cost, complexity, and risk to the equation. Can the organization tolerate the risk of using unsupported Microsoft technology? If an application or business process stops working (because, for example, changes to the underlying operating system cause an unsupported Microsoft technology to fail), what is the impact on the business? Do the unsupported technologies have information security implications? Customers that choose to remain on unsupported offerings could find themselves vulnerable to security flaws that are no longer Microsoft’s responsibility to identify and fix. If available, what is the cost of extended support? Extended support is available for a select handful of offerings on this year’s list – but at a price. Often the dollars spent towards extended support could make a sizeable dent in the cost to migrate to a newer version. If applicable, why does the organization want to remain on an unsupported version? It’s a rudimentary question, but an important one as it uncovers bigger issues related to the alignment between the customer’s IT roadmap and Microsoft’s. When faced with this question many companies find that they don’t have a clear answer, and it is the catalyst for a broader analysis of technical strategy. It’s important to understand the fine print governing end of support for Microsoft products. Like most things Microsoft, cost-optimized navigation of the changes requires expert clarification of contractual terms, well-planned alignment of the customer’s IT roadmap with Microsoft’s roadmap, and insight into Microsoft’s motivations and business objectives. Microsoft license and cost optimization is an NPI center of excellence. Contact us if you’d like to learn about our services – NPI is not a reseller, we are unbiased licensing experts. Download PDF Download My Copy Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Bulletin Are Microsoft Enterprise Agreements Going Away? Feb 5, 2025Microsoft Download PDF Download My Copy Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Microsoft’s decision to phase out the EA option for certain Level A customers may be a sign of bigger changes on the horizon. While Microsoft has framed this as an effort to simplify licensing, the shift to EA alternatives will have significant implications. As we examine Microsoft’s latest moves, the question isn’t just which customers are being impacted today – but whether Microsoft’s largest customers will soon face similar pressures to transition away from the traditional EA framework. Are Microsoft EAs really going away? It’s a fair question. In late 2024, Microsoft announced: “Beginning January 1, 2025, a small percentage of Cloud Enterprise Agreements (EA) in direct markets will no longer be eligible for renewal under the existing EA framework.” There are two things we want to point out. First, Microsoft hasn’t officially defined what Cloud EA means. We can assume it refers to EAs that include only Online Services and Azure – no on-premises licenses, special amendments, or discounts. Second, there have been rumblings for a while now that Microsoft wants to eliminate the EA option for Level A customers (500 – 2,399 users/devices). The vendor wants to move these customers to MCA-based licensing or CSP. The MCA (Microsoft Customer Agreement) is a simplified, direct-buy option from Microsoft. It’s essentially a bigger version of CSP – there are no price bands, no Software Assurance, no From SA SKUs to renew, no discounts or amendments. As Microsoft puts it: “For enterprise customers, the Microsoft Customer Agreement for enterprise (MCA-E, the digital evolution of the traditional EA), will provide the optimal, streamlined solution.” We’ll dive deeper into the implications of switching to MCA-E later, but let’s address the big question. Will Large Enterprise Customers Be Forced Off EAs in 2025? So far, none of our clients have been forced off their EAs. However, we’ve heard reports of large resellers being instructed not to provide EA renewal quotes and instead directing Level A customers to Microsoft for alternative options. Is this widespread? No. Is it concerning? Yes, but the sky isn’t falling yet. A full sunset of the EA in 2025 seems unlikely, though it’s possible. Current EA contracts include conflicting guidance about what happens after enrollment expiration: End of Enrollment term and termination. General. At the Expiration Date, Enrolled Affiliate must immediately order and pay for Licenses for Products it has used but has not previously submitted an order, except as otherwise provided in this Enrollment. Renewal option. At the Expiration Date of the initial term, Enrolled Affiliate can renew Products and Services by renewing the Enrollment for one additional 36 full calendar month term or signing a new Enrollment. Microsoft must receive a Renewal Form, Product Selection Form, and renewal order prior to or at the Expiration Date. The renewal term will start on the day following the Expiration Date. Microsoft will not unreasonably reject any renewal. Microsoft may make changes to this program that will make it necessary for Customer and its Enrolled Affiliates to enter into new agreements and Enrollments at renewal. We interpret this to mean Microsoft cannot unreasonably deny a 36-month renewal. If the vendor enforces the “enter into new agreements” clause, it could trigger customer litigation due to the significant differences between the EA and MCA-E or CSP options. In short, Microsoft seems motivated to steer Level A customers away from EAs – unless those customers significantly increase spending on the products Microsoft prioritizes. Pay Attention – And Get Smart About EA Alternatives In any case, Microsoft enterprise customers should pay close attention to how this change plays out in the coming months. They should also familiarize themselves with Microsoft’s EA alternatives. Customers will lose some of the benefits they have under their EA when they move to MCA-E or CSP. In some cases, customers will have to string together multiple license types to try to approximate the pricing and benefits they get with the EA. Another potential pitfall for customers who are required to go from an EA to an MCA-based license agreement is that they may be considered a “net new” customer by Microsoft. This means that under the MCA, they could be required to buy M365 E3/E5 without Teams and buy Teams separately, which will add a few dollars per user per month. CSPs may be able to help some organizations renew existing subscriptions with Teams, but they won’t be able to help organizations moving from EA to CSP to buy brand new subscriptions with Teams. Three Key Changes for EA Customers Moving to MCA 1. Pricing and Discounts: Lower Costs for Some: Some customers might pay the same or even less under the MCA, thanks to the flexibility offered by Cloud Solution Provider (CSP) partners and the ability to purchase on a month-to-month basis. For instance, customers might save on temporary needs, like hiring summer employees. Higher Costs for Others: Despite potential savings, some customers could see their overall costs rise. MCA customers may lose benefits like the favorable terms offered under EA for on-premises products with Software Assurance (SA), or they could face complexity due to managing multiple contracts with different resellers. 2. Licensing Complexity: Loss of Flexibility: MCA agreements are simpler and shorter than EAs, but customers may lose access to certain programmatic discounts and products. For example, the MCA does not allow customers to renew SA for perpetual licenses like Windows Server and SQL Server, which could force organizations to migrate to higher-cost server subscriptions or use additional programs like Open Value. Microsoft 365 Licensing Challenges: Moving from an EA to an MCA could disrupt how Microsoft 365 licenses are purchased. EA customers enjoy broader options and preferential rights for Microsoft 365, which may not be available under the MCA. This could lead to customers needing to use multiple programs to replicate the same coverage, leading to higher overall costs. Teams Licensing Issues: The shift from EA to MCA could classify a company as a “net new customer,” which would prevent them from bundling Microsoft Teams with Microsoft 365. This would force companies to repurchase Teams separately, resulting in higher costs due to the split licensing for net new customers. 3. Contract and Purchase Process: Simplified Contracts: One of the main selling points of the MCA is its simplified structure, with much shorter contracts (about 9 pages vs. 30 pages for an EA) and automatic renewals. This contrasts with the complex negotiations involved in renewing an EA. Multiple Contracts for Some: Customers may need to work with multiple resellers or licensing programs to maintain similar coverage, adding potential hassle and increasing the risk of higher costs due to the lack of integrated deals. Conclusion The removal of the EA option for certain Level A customers may be just the beginning. Microsoft’s broader strategy appears to be aimed at reshaping enterprise licensing, making it essential for organizations to closely monitor these developments. If Microsoft is willing to sunset EAs for one segment, it raises concerns about whether larger enterprise customers will be next. Understanding these potential shifts – and proactively evaluating alternative licensing options – will be critical to avoiding unexpected cost increases and operational disruptions. We will be keeping a close eye on Microsoft’s behavior in the coming months, and how serious they are about moving their largest customers away from the EA. To stay current, register for one of our upcoming Microsoft Licensing webinars or contact us. Download PDF Download My Copy Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog 3 Tips for Negotiating a Better Deal with Splunk Jan 28, 2025Splunk Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. If you’ve negotiated with Splunk recently, you probably experienced a complex negotiation cycle – especially if you are a large enterprise customer. If your deal was a renewal, the negotiation was likely more difficult than the last iteration. Why is that? Contributing factors include the usual suspects like evolving SKUs, licensing, and pricing. But it’s also a byproduct of the leverage Splunk has acquired through its own success. The vendor’s solutions have become critical for security, operational efficiency, and data-driven decision-making. As Splunk’s Market Share Grows, So Does Negotiation Complexity Known for its ability to ingest, index, and analyze vast amounts of data, Splunk enables organizations to improve resiliency and performance across IT, security, and DevOps functions. The vendor has shown strong and consistent revenue growth in recent years, nearing the 20% mark quarter-over-quarter, with Cloud ARR (annual recurring revenue) showing robust expansion. Splunk has a strong customer adoption rate across the Fortune 500. Of Splunk’s growing customer base, more than 900 generate over $1M+ in ARR. Most customers come to the Splunk negotiation table at a disadvantage. They’re highly reliant on the vendor’s offerings and lock-in is strong. That’s why it’s important for customers to do all they can to expand their leverage during and before negotiating a deal with Splunk. 3 Tips for More Effective Splunk Negotiations Here are three tips to help you negotiate a world-class outcome on your next Splunk purchase or renewal: 1. Consider More Than One Viable Option When approaching negotiations with Splunk, enterprises should ensure they develop multiple deal scenarios. Restricting negotiations to a single option limits leverage and constrains opportunities for cost savings. New products or pricing tiers can often be optimized when evaluated against alternatives, making it easier to identify and secure the best possible deal. Splunk’s pricing model can be complex, with variables like data ingest volume, subscription tiers, and additional modules (e.g., Enterprise Security or IT Service Intelligence). By considering multiple configurations – such as adjusting data usage thresholds, opting for phased implementation, or negotiating multi-year contracts with built-in flexibility – organizations can create competitive pressure that encourages Splunk to offer more favorable terms. Key takeaway: Work with cross-functional teams internally to brainstorm at least two or three deal scenarios. 2. Scrutinize Products Outside Core Subscriptions Splunk’s flagship offerings, Enterprise/Cloud subscriptions and major add-ons like Enterprise Security (ES) or IT Service Intelligence (ITSI), provide immense value to enterprises. However, it’s crucial to closely examine tertiary products and new pitches Splunk may bundle into a deal. Increasingly, organizations report being offered additional products or services that carry significant premiums but may not deliver comparable value or utility. These include experimental tools, analytics modules, or supplementary services designed to drive incremental revenue for Splunk rather than enhance your organization’s outcomes. While some of these products may align with specific business goals, others can inflate costs unnecessarily. Key takeaway: During the negotiation process, conduct a thorough ROI analysis for all proposed products, particularly those outside Splunk’s core portfolio. Consider whether alternative solutions from other vendors might better meet specific requirements at a lower cost. If Splunk insists on bundling tertiary products, push for deeper discounts or flexible opt-out provisions. 3. Start Negotiations Early Splunk negotiations should not be rushed, nor should they be last minute. It’s the surest way to leave money on the table and pay more than your peers. Complex agreements, particularly those involving multi-year contracts or significant changes to existing deployments, require substantial lead time for internal alignment and external negotiation. Rushing the negotiation process can result in missed opportunities to secure discounts, optimize configurations, or address key concerns. Splunk’s fiscal cycles and quarterly sales targets often create additional opportunities for discounts, but identifying and leveraging these requires careful planning. Key tip: Begin negotiations at least several months before the contract’s renewal or start date. This allows ample time for due diligence, competitive analysis, and multiple rounds of discussions. Do You Have a Splunk Negotiation Planned In the Next 12 Months? As enterprises increase their reliance on data to drive decision-making and innovation, smart negotiations with a leading provider like Splunk are more important than ever. By exploring multiple deal scenarios, scrutinizing the value of tertiary products, and starting negotiations early, customers can negotiate a deal that reduces cost and risk while improving overall value. If you have a Splunk purchase or renewal on the horizon, NPI can help. Contact us. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Are You Ready for the 2025 Software Audit Frenzy? Jan 22, 2025Adobe, Audit Defense, Broadcom, Microsoft, Oracle, VMware Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Software audit: the words no IT procurement professional wants to hear but can’t afford to ignore. If you’re in the enterprise IT world, you’ve probably noticed a spike in audit activity lately. And so have we, which is why we’re offering a new Enterprise Software Audit Defense Workshop as part of our online training curriculum. In the trenches, our analysts are reporting record numbers of audit activity among our clients. So, why the sudden increase in software audits for enterprise customers in 2025, and how can you avoid becoming the next cautionary tale? Why Are Software Audits Increasing in 2025? It all comes down to two things: revenue and product adoption. Let’s start with the former. Software vendors are under intense pressure to increase revenue year over year, and audits have become a tried-and-true method to achieve that. Why? Because when it comes to enterprise-scale software deployments – think Microsoft or Oracle – nearly every customer is out of compliance with their software licensing agreements in one way or another. The vast majority of these instances are unintentional, but that has no bearing on the outcome. Fees for noncompliance can easily be 7 or 8 figures. A company’s risk for software audits is directly tied to the financial performance of their software vendors. Let’s take Oracle, for example. Last quarter, the company’s revenue fell short of analyst expectations. While Java audits have been a concern for a while, companies are seeing a dramatic increase in audit notifications for database and middleware. Funny how that works. Software audits are also a direct line to increasing product/solution adoption using pressure tactics. If you don’t want to upgrade at your next renewal, your software vendor may threaten an audit. Or let’s say you undergo a formal audit. Rather than pay $15M in penalty fees, the vendor may offer to waive the penalty if you upgrade or migrate to a solution that is better aligned with their product roadmap. Both of these scenarios are very common and underscore the importance of addressing compliance as part of your software renewal preparations. Which Vendors Are Auditing the Most? By the numbers, the biggest offenders continue to be the usual suspects as the list below indicates. But it’s important to point out what the list doesn’t show us. Emerging software vendors are following in the footsteps of giants like Microsoft and Oracle, adopting aggressive auditing practices to boost their bottom lines. The result? No software vendor is too small to send an audit notice your way. Here are the biggest offenders over the last few years: Oracle: Known for its rigorous audit processes, Oracle continues to be a primary threat. Their focus on enterprise solutions like databases and ERP systems ensures they target the most lucrative accounts, while Java deployments are particularly vulnerable given recent licensing/pricing changes. Microsoft: Microsoft audits aren’t new, but they’ve ramped up in the cloud era. With many enterprises shifting to Microsoft 365 and Azure, the risk of misinterpreting licensing terms is high – and so are the stakes. Adobe: Adobe’s Creative Cloud and Document Cloud have made their software indispensable. But beware: even a single unlicensed installation can trigger an audit. VMware (Broadcom): Broadcom loves a good audit, and they can be ruthless. Since its acquisition of VMware, audit activities have surged. Non-compliance in these environments can result in hefty penalties. SAP: SAP’s audit strategy is notoriously complex, especially for enterprises using their ERP systems. Their focus on indirect usage often catches companies by surprise. How Can You Prepare? Here are two resources to help your IT procurement team prepare for the uptick of software audits in 2025: Register for our Enterprise Software Audit Defense Workshop. This live session will cover vendor-specific guidance, audit red flags, and best practices that align with vendor’s software audit playbooks. This is a must-attend for anyone serious about getting ahead of the audit threat in 2025. Read our step-by-step guide on The Importance of Software License Audit Preparation. We cover things you can do right now to reduce your risk exposure on your largest software estates. The Bottom Line The software audit surge of 2025 isn’t going away anytime soon. For enterprise IT procurement teams, preparation isn’t just a best practice – it’s a survival skill. By staying informed, proactive, and vigilant, you can turn audits from a crisis threat into an opportunity to strengthen your compliance framework. Remember, the best audit is the one that never happens! Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog IT Vendor Management Best Practices to Cut Costs Dec 30, 2024 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. IT contracts can be complex, and pricing can often be unpredictable. As a result, on average, companies overspend on about 85% of their IT purchases. As digital transformation and AI continue to drive higher investment in the IT spend category, you need a robust IT vendor management process to avoid overspending, optimize licensing, and ensure that vendors deliver on their promises. This is especially true for large enterprise companies, where IT spending is high, and they manage hundreds of business-critical technology vendors whose products and services are frequently bundled. IT vendor management is the process of overseeing and managing relationships with third-party technology suppliers to ensure efficient delivery, cost-effectiveness, and alignment with organizational goals. This is critical to ensure you’re getting your money’s worth, and the products and services meet your standards in a cost-effective manner. IT vendor management’s best strategies go beyond choosing the right vendor. You need to monitor performance and value over time to make sure your goals are being met and you are getting best-in-class pricing on your hardware, software, cloud, and SaaS spend — especially at renewal times. IT Vendor Management Best Practices for Cost Reduction So, how do vendor management best practices help you keep costs in check? Here are eight IT vendor management best practices to maximize cost efficiency. 1. Establish Clear Vendor Negotiation Criteria for Cost Efficiency Cost-effective IT vendor management requires establishing clear criteria in the negotiation process (just as you established clear criteria in the selection process). You need to determine what is most important to your organization — factors include price, licensing flexibility, futureproofing, SLAs and other risk management and commercial terms. By setting these criteria upfront, you can ensure your IT procurement process and focus aligns with your risk management and cost-saving goals. You should also maximize preparation before you start getting quotes. IT deals are often complex, and IT buyers are typically outgunned by the enterprise vendor sales machine. NPI can empower you to come to the table with market intelligence, negotiation intelligence, and predictive analytics to source, plan, and negotiate better deals. 2. Align Your IT Roadmap with Your Vendor’s It’s important to have visibility into your vendor’s roadmap. This will help you understand their priorities. Look for opportunities to align your organization’s short and long-term IT roadmap with what your vendor has planned. Areas of alignment can serve as negotiation leverage during new purchase and renewal conversations. 3. Regularly Assess Vendor Performance to Ensure Value To ensure ongoing value, you need to regularly assess performance against key metrics such as delivery timelines, quality of service, uptime, SLA’s and contractual obligations. By consistently monitoring vendor performance, you can identify any issues early and take corrective action before they lead to increased costs or business risk. 4. Implement Effective Contract Management Strategies Contracts should clearly define the scope of services, pricing structures, performance expectations, and penalties for non-compliance. By carefully drafting and managing contracts, you can avoid hidden fees and ensure you are only paying for the IT assets and services you receive. It’s a good idea to review contracts regularly to ensure ongoing cost control, especially when needs or market forces change. At renewal times, a comprehensive contract review is essential to avoid getting locked into rate increases without negotiation. 5. Negotiate for Cost-Effective Terms and Prices Approach negotiations with a clear understanding of your budget, fair market value pricing targets for the solutions being provided, and what other vendors are offering (and for how much). This knowledge can be used to negotiate better rates or more favorable terms — leading to lower costs over a contract’s lifecycle. IT price benchmarking is one of the most powerful and least disruptive IT cost reduction tactics. This, combined with software license optimization, can result in 7-, 8-, and 9-figure savings. Over 130 of the Fortune 500 trust NPI’s team of 300+ consultants, analysts, and vendor-specific specialists to use these tactics to drive savings on billions of dollars of IT and telecom spend. 6. Utilize Technology for Cost-Effective Vendor Management Vendor management software (VMS) can automate many aspects of vendor management, such as performance tracking, contract management, and invoice processing. These tools can help reduce administrative overhead, minimize errors, and provide better insights into vendor performance and spending. 7. Consolidate Vendors to Leverage Volume Discounts One effective cost-cutting strategy is to consolidate your vendor base. By reducing the number of vendors and increasing the volume of business with a select few, you can often negotiate better rates and volume discounts. This approach not only reduces costs but also simplifies vendor management. Risk Management to Avoid Cost Overruns Risk management is an essential component of IT vendor management best practices when it comes to avoiding cost overruns. By identifying potential risks in vendor relationships, such as service disruptions, compliance issues, or financial instability, you can more effectively mitigate these risks and prevent costly surprises. How NPI Can Enhance Your Vendor Management Strategy Cost savings is just one benefit of strong IT vendor management. However, as enterprise IT vendors seek to extract more revenue from customers, more companies are taking a holistic approach to cost reductions. This includes finding opportunities to optimize costs throughout the entire vendor management lifecycle. NPI works hand in hand with enterprise IT vendor management to identify and eradicate tech overspending. By ensuring our clients pay the lowest price possible for only what they need, we help clients regularly achieve multi-million-dollar savings. On individual purchase transactions, savings of 20% to 50% are common. Get the pricing, licensing, and negotiation intel you need to secure a world-class outcome on every IT purchase and renewal. Contact NPI today to get started. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog The Importance of Software License Audit Preparation Dec 23, 2024 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Companies like Microsoft, IBM, Oracle, SAP, Salesforce, Adobe, and ServiceNow are increasing the frequency of software audits. Audits can be significant revenue drivers for software companies. 22% of IT leaders surveyed admitted paying more than $5 million resulting from audits over the past three years. Before providers come calling, conducting an internal software license audit (also called a self-audit) is smart business, ensuring your legal and financial accountability as well as avoiding fines or penalties. What is a Software License Audit? A software license audit is a systematic review of your software assets and corresponding licenses. It involves a comprehensive assessment of all software, including the number of instances, types of licenses held, and the terms and conditions governing use. The primary objective of a software license audit is to ensure that you are compliant with the licensing agreements you agreed to with software suppliers. Violating the terms or using unlicensed software can result in significant penalties. Why Are Internal Software License Audits Important? Few companies have full visibility into every software deployment in their environment. This is particularly true for large software estates from vendors like Microsoft, IBM, SAP, Salesforce, Oracle, and Adobe. Not knowing what you own, where the software is installed and how it’s being used can put you at risk. The Business Software Alliance (BSA) reports that as much as 37% of software in use is unlicensed. For the most part, the use of unlicensed software in enterprise environments is unintentional – it goes back to not having full visibility into usage and deployments. Violation of the use rights terms within enterprise software license agreements can result in severe consequences, including hefty fines and forced upgrades. When discrepancies are uncovered by the software providers, 64% of companies had to pay additional fees for non-compliance according to a survey by Unisphere Research. In NPI’s experience, these fines can easily reach 7 and 8-figures. The solution is to perform an internal or self-audit to determine your compliance position before the vendor gets involved. Benefits include: Internal software license audits can uncover significant cost savings. With accurate tracking of usage and licenses, you may be able to identify shelfware and re-profiling opportunities to reduce costs . One recent survey estimated that enterprise customers wasted an average of $18 million on unused applications. BSA surveys show that companies with a robust software optimization program can often save as much as 30% in annual costs. Such savings are common, especially with SaaS products. Gartner estimates that 30 percent of cloud fees paid by enterprises for licenses are dormant or include features not being used. This toxic spend can often be uncovered and eliminated during a license optimization assessment. Internal software license audits also uncover non-compliance with software license agreements that expose organizations to significant risks, such as unbudgeted costs and operational disruptions. There are also security risks. Malware is common in unlicensed or pirated software. If employees are using products they bring, such as BYOD software, you could be exposing your network to risk. If there is a breach due to unlicensed software, any cyber insurance policy you have may limit coverage. An internal software license compliance audit helps mitigate these risks by giving you full visibility into usage, including who’s using what and for what purposes. This allows companies to validate adherence to their licensing agreements. By proactively performing internal license assessments for your on-premises and SaaS platforms, you can significantly reduce your risks. Benefits of Performing an Internal Software License Audit Conducting regular internal software license audits produces several key benefits, including: Enhancing cost management and elevating budgetary precisionMitigating the risk of non-compliance fines and legal entanglementsFortifying software asset oversight and transparencyStreamlining the deployment and retirement workflows for softwarePinpointing unutilized or underutilized software license holdingsOptimizing investments in software and negotiating advantageous licensing arrangements Common Factors Leading to Non-Compliance Despite the best intentions, organizations can inadvertently fall into non-compliance due to a wide range of reasons. The complexities of virtualized environments can make it difficult to accurately track software usage and licensing requirements. Software licenses are often complex. Managing compliance across multiple vendors makes it even more challenging. For example, different software vendors may define use in different ways, leading to confusion. Lack of a proper software asset management process and tools can result in licensing oversights and non-compliance. As employees come and go or shift to new positions, it’s not uncommon for licensing to get out of sync. Operating Outside of Limited-Use Licenses Some software licenses have restrictions on usage scenarios, and inadvertently exceeding those limitations can lead to non-compliance. Shifting Product Use Rights and Online Services Terms Software vendors may change their licensing models or product use rights over time, and organizations may not be aware of these changes, leading to unintentional non-compliance — meaning you could be compliant one day and not the next. The complexity of software licensing models, such as perpetual licenses, subscriptions, and virtualization licenses, can lead to misinterpretations. Ignoring New License Requirements for Software Upgrades Upgrading software versions can introduce new licensing requirements that organizations may overlook. Mergers and Acquisitions Complications Mergers and acquisitions can introduce new software assets and licensing agreements, making it challenging to maintain compliance during the integration process. Best Practices for Maintaining Software License Compliance To ensure ongoing compliance, organizations should adopt the following best practices to minimize software license audit risk: Identify software vendors that present the greatest risk: Typically, your largest deployments are most at risk as these software vendors have built entire revenue strategies and resource groups around audits. They’re also highly motivated to move large portions of your estate to upgraded SKUs. Implement Software Asset Management (SAM) processes: Establish diligent processes for managing software assets, including procurement, deployment, and retirement. Conduct regular internal software audits: Perform periodic internal audits to assess compliance and identify any discrepancies or areas for improvement. Train staff on licensing requirements: Educate employees on software licensing policies, terms, and conditions to foster a culture of compliance. Maintain accurate software inventories: Keep detailed records of all software installations, licenses, and usage patterns across the organization. Leverage software license management tools: Invest in specialized tools and solutions to streamline license management, optimize usage, and ensure compliance. Stay informed about vendor updates: Monitor software vendors’ licensing model changes and product use rights updates to ensure ongoing compliance. Establish clear policies and procedures: Develop and enforce comprehensive software licensing policies and procedures to promote consistency and accountability. Seek expert guidance: Consider partnering with experienced software license compliance experts to provide guidance and support throughout the audit process. If you’ve received a license audit notification, you want an expert on your side to help. Performing an internal software audit or license position assessment on your own is time-intensive and complex. Software License Audit Services At NPI, we understand the complexities and challenges associated with performing an internal software license audit. We offer comprehensive software license audit services tailored to the unique needs of your organization. With our expertise, you can navigate the intricacies of software licensing, ensure compliance, and optimize your software investments. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog The IT Procurement Process: What It Is and Best Practices Dec 20, 2024 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. IT procurement is a process for evaluating, acquiring, and managing technology and associated services to support your business tech needs. It includes researching products and services, sourcing with suppliers, negotiating contracts, and managing IT assets over their lifecycle. At a macro level, the objective is simple – to secure quality goods and services that align with your business goals at optimal pricing to realize maximum value. When treated as a strategic discipline (as most Fortune 500 companies do), effective IT procurement can help you: Ensure organizational and departmental users have the tools they need for maximum performanceReduce, manage and forecast IT costsMinimize technical, security, compliance, and financial risksImprove market competitiveness and overall operational efficiencyComply with internal or industry requirements Why You Should Reevaluate Your IT Procurement Process Technology touches every corner of the business, and is evolving at a historically fast clip; and so are enterprise IT buying processes. What was the best available product a few years ago might be woefully outdated today. This is especially true with the rapid development of new AI-enabled solutions and the integration of AI tools into existing products. Layer in the changing pricing and licensing models and new business and budget and security requirements and the IT buying landscape has become remarkably more complex. Companies must continuously evaluate their procurement processes to make sure their strategy aligns with the current and future goals of the business. It’s important to point out that changes in technology have directly impacted IT procurement capabilities. The number and breadth of vendors in the ProcureTech landscape has exploded since 2021. AI is quickly becoming indispensable for vendor management, providing real-time insights into pricing trends, supplier risk, and market data to enhance negotiations and reduce risks. Additionally, specialized IT procurement platforms are streamlining purchasing, contract renewals, and vendor management, enabling teams to efficiently handle increasing transaction volumes and complex vendor landscapes while maintaining compliance and cost-effectiveness. Key Steps in the IT Procurement Process The IT procurement process looks different for every organization depending on the complexity of the business’s technical and business requirements and the bench strength of the IT sourcing team. However, most IT buying processes are built around these key actions. Identifying Needs and Requirements Establish a detailed understanding of business, technical and user requirements, and how these needs align with your company’s strategic goals. A comprehensive needs assessment will help keep your process focused on acquiring the tech tools that support your objectives. Multiple stakeholders from different parts of the organization should be involved. A cross-functional and collaborative approach will make sure the purchase outcome meets the needs of users. Supplier Selection and Evaluation With your needs established, you can start researching and sourcing vendors and products to decide which ones best meet your requirements. Factors to consider during supplier/solution evaluation include: Quality of the products or servicesVendor reputation and customer satisfactionPricing and licensing optionsCustomer service and supportTransition assistanceReliability (proven uptime and performance)Compatibility with existing systems and workflowsScalability You will also want to conduct a thorough risk assessment to identify potential issues that might impact the organization. This includes evaluating the financial stability of the vendor, the security of their products, and how they comply with industry or governmental regulations. Effective IT vendor negotiations require an understanding of fair market value pricing and what’s motivating the vendor at the negotiation table. You can’t negotiate a fair price if you don’t have an idea of what your peers are paying for similarly scoped purchases. The challenge? Pricing disparity is rampant in the IT category. What you pay can be 20 or 50% higher or lower than the next customer with similar requirements. Pricing is opaque and constantly in flux and this puts you at a significant disadvantage. Transaction-specific IT pricing benchmarks can help you know whether you’re getting a good price or not. We find that the vast majority of companies overspend on their IT procurement. In fact, our analysis shows that companies pay a fair price for less than 15% of all IT deals — and it’s gotten worse in the past three years. Market conditions, consolidation, scarcity, and the AI arms race are forcing vendors to be more aggressive than ever. Between equipment, SaaS subscriptions, and licensing, it often adds up to millions of dollars in wasted spending. Implementation and Integration As contracts are signed, you move from procurement to deployment. Effective implementation requires planning and coordination to minimize disruption and ensure the new technology delivers the expected benefits. Your contract may or may not include training or implementation services depending on the technology type (SaaS, cloud, infrastructure, hardware, etc.) and your needs. Benchmarking services rate cards is also an important element of IT procurement excellence. Performance Monitoring and Management As you get things up and running, you also need to put a process in place to monitor performance. This typically includes creating a set of KPIs and ensuring that the products operate as promised and meet your goals. If things aren’t working the way you expect, it’s time for a conversation with your vendor to address issues or make adjustments. Performance management is key to maximizing value. It also holds vendors accountable. Effective IT Procurement Best Practices A few key best practices can help guide your procurement process and improve outcomes. These include: Use data and analytics to inform decision-making throughout the procurement process. This includes analyzing spending patterns, evaluating supplier performance, and assessing the costs for different solutions. Focus on Total Cost of Ownership While the lowest-priced product may serve your needs, you want to think about the total cost of ownership (TCO) rather than just the initial expense. Consider things like maintenance, support, operations, and upgrade or add-on costs. They can add up fast. Negotiate for Value (Not Just Price) While cost is always a factor, it’s also crucial to negotiate for value. This means factoring in the terms and conditions, service level agreements (SLAs), staged costs to matched staged deployments, and other things that can enhance the overall value you get. Continuously Monitor and Improve Treat IT procurement as an ongoing process rather than a one-time event. Continuously monitor supplier performance and look for ways to optimize costs and improve value. Check out more best practices and stay on top of emerging trends in IT procurement with our IT Sourcing insights. How NPI Can Support Your IT Procurement Needs NPI specializes in helping organizations optimize their IT procurement processes to save money, increase decision-making confidence, and accelerate purchasing cycles. We regularly save enterprise companies seven figures on their purchases and renewals and are trusted by over 130 of the Fortune 500. Want to maximize your IT procurement process and save time and money? Contact NPI today. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.