NPI Advises Sourcing Professionals on Methods to Reduce Shadow IT Cost and Risk

Rogue technology spending rooted in sourcing processes that are not designed for speed

ATLANTA – June 26, 2014 – NPI, a leading spend management consulting firm, advises enterprises to make fundamental changes to sourcing processes and behavior in an effort to rein in shadow IT spending. Experts estimate that unsanctioned, decentralized IT purchasing in the average enterprise amounts to as much as 20 percent of the entire IT budget. NPI’s research into more than 400 purchasing programs across the last decade indicates that sourcing processes contribute to the problem.

According to a recent survey conducted by 2nd Watch, 61 percent of enterprise business units using the cloud are bypassing their IT departments to acquire these services. In another study by Stratecast, 38 percent of business and 32 percent of IT workers say they use non-approved apps because IT approval processes are too slow. Another 18 percent of business and 14 percent of IT workers use these apps because the approved solutions don’t perform needed functions.

“It’s clear that in some organizations there is a growing disconnect between IT sourcing and departmental users, and the sharp increase in shadow IT spending is a direct result. In these organizations, IT sourcing is viewed as an impediment. Steps must be taken to shed this perception – the cost and risk of not doing so is simply too great,” said Jon Winsett, CEO of NPI.

As cloud computing, mobility and BYOD continue to transform the enterprise, NPI advises companies to take steps to simplify and expedite the way they source information technology and telecom products and services:

• Assemble cross-functional sourcing teams. In order to equip IT users with technologies that meet their functionality requirements, cross-functional collaboration between procurement, finance and the business/department owner (marketing, for example) is essential. It’s impossible to expect a sourcing or IT professional to understand the nuances of marketing technology, just as it’s impossible for marketing professionals to understand the intricacies of vendor management.

• Benchmark pricing and business terms. Vendors are well trained to take advantage of shadow IT purchasers such as a sales organization that purchases a new cloud-based presentation tool. In many cases, these organizations will pay above fair market value prices for sub-standard contract terms and conditions. IT sourcing departments must be able to quickly and effectively benchmark pricing and terms and optimize licensing rights. This will make sure IT users have timely access to the tools they need at pricing and terms that are best-in-market, as well as ensure vendor agreements are engineered for flexibility and savings in the future.

• Expedite the sourcing process through vendor intelligence. The IT purchase has grown overwhelmingly complex. New licensing and pricing models, mobility and cloud, closer regulatory scrutiny, and a rapidly changing vendor landscape have made it difficult to purchase IT in a way that’s both responsive and fiscally responsible. Today’s sourcing departments require deeper vendor intelligence in a fraction of the time. To cut purchasing cycles, many are turning to outside advisors to provide vendor-specific pricing, licensing program and incentive intelligence that supports rapid negotiation cycles and purchase completion.

For more information on NPI’s IT sourcing and procurement services, visit /cost-management-consulting-services.

About NPI

NPI is a spend management consulting firm that protects companies from overspending in specific cost categories – information technology, telecommunication and transportation. Using a combination of market experts, proprietary methodologies and extensive data, NPI ensures that prices and terms are best-in-class. Reviewing more than 14,000 purchases annually, NPI provides objective oversight for billions of dollars of strategic spend for its clients.

To learn more about how NPI can help your company start saving today, visit www.npifinancial.com or call 404-591-7500.

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