4 Tips for IT Sourcing Pros to Help Protect the IT Budget Amid Uncertainty

By NPI
March 20, 2020
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IT

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As companies modify their operations in real-time to address the big challenges we are all facing right now, the IT hive is buzzing. Shifting to a “work from home” model is causing many companies to expand – or deploy for the first time – enterprise-grade collaboration technologies. Use of Microsoft Teams is presently 44M daily active users, up from 20M in November(!). Industries like healthcare are expediting large-scale telemedicine projects. Some are making IT infrastructure changes to meet surges in demand or react nimbly to supply chain disruption.

”Need it ASAP” purchasing timeframes may put more pressure on IT sourcing teams in the short term. Technical, user and budget requirements are evolving on the fly as businesses navigate unknown territory. Here is a short list of things IT sourcing professionals can do to execute IT purchases with greater confidence amidst current uncertainty:

Continue to perform IT price benchmark analysis on all material IT purchases and renewals

We preach the merits of IT price benchmark analysis on this blog a lot – and that’s because it’s the single most effective thing companies can do to reduce IT spend without sacrificing value. There is no “Kelley Blue Book” for IT. A vendor can charge two companies that buy the exact same thing two very different prices. Historically, that’s even more true if the vendor senses the customer has a tight deadline.

To be fair, many vendors are being empathetic as they try to help clients work through the unique challenges of the current business climate. However, we anticipate IT pricing disparity to grow even more as IT vendors try to protect their own revenues for the remainder of 2020 (we’re already seeing instances – read more here). Performing IT price benchmark analysis neutralizes the pricing discussion, establishes a level playing field and eliminates the possibility of overspending.

Negotiate flexibility into licensing and discounts

It’s best practice to build flexibility into vendor agreements in order to prepare your organization for changing user counts and requirements in the future. That’s even more important today. This includes well-negotiated tiered pricing (as applicable), and discount and upgrade structures that allow for changes in demand. While most IT vendors are very hesitant to provide contract language governing reductions, having tiers that reflect not only growth but also reductions could help address the possibility of contraction. Renewal protection is also an area to be explored. Contract language should either remove or cap the ability to increase pricing for a specified period of time.

It’s also a good time to reexamine your current licensing and subscription choices across your software portfolio for optimization opportunities. What met your requirements two years ago (or even three months ago) may not be the best choice for the next 12 months. As we discuss in this blog post, this will help eliminate overbuying and over-licensing while building in maximum flexibility based on current and future-state requirements.

Understand your recourse now – especially for outsourcing and professional services agreements

Ongoing disruptions could make large outsourcing contracts a pain point if not proactively managed at this point. This is especially true for prepaid agreements with expiring pools of hours. NPI recommends clients review contract terms to see if any recourse is included for force majeure events. Early  management of significant labor pools or other professional services in anticipation of a variety of scenarios is wise. Many contracts include protections, and now is the time to get familiar with them, and begin scenario planning with your vendor partners.

Take advantage of lulls to inspect secondary and tertiary purchasing

It’s possible that some companies in hard-hit industries such as hospitality and brick-and-mortar retail will choose to put discretionary purchasing and planned projects on hold unless they are directly related to current business needs. As a result, there may actually be some breathing room for IT sourcing teams.  Take this time to review “other” areas of IT spend that may not see as much price benchmarking, especially if needs may expand due to global events. For example, Video Management Systems (VMS) that govern things like facial recognition and security camera management are an area where NPI sees surprisingly large savings potential despite these purchases not always being a priority for price benchmarking. Vendors like Verint, Milestone, Qognify (previously OnSSI) and Genetec represent opportunities for deeper sourcing reviews.

Final thoughts

On a positive note related to purchase activity, as we provide IT sourcing services to our clients NPI has seen no material change in purchase volumes year-over-year for the period February 1 through March 18 – and we view that as good news for enterprises and for the IT vendors who support them. We have seen a few unplanned investments in collaboration tools, and acceleration of several already-budgeted healthcare technology investments. We are honored to help.

These are challenging times for every business in every industry, and confidence and flexibility are in high demand. IT sourcing teams have an opportunity to help their companies absorb some of the shocks generated from these unprecedented events.

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