Your job as an IT sourcing professional is extraordinarily tough – and becoming more challenging every day. You’re tasked with ensuring hardware, software, and services align with your budgetary and business goals. For IT purchases and renewals, this can be extremely challenging across complex contracts, service tiers, and a constantly evolving product mix.
Another challenge? Enterprise IT spend is skyrocketing. Gartner estimates worldwide IT spending will total $5.26 trillion in 2024, an increase of 7.5% from 2023 – and is on track to surpass $8 trillion by 2030. IT sourcing teams today must be strategic and agile in order to speed buying cycles while simultaneously spending judiciously.
The first step? Having the right intel to help you negotiate world-class outcomes on IT purchases and renewals. Procurement market intelligence for IT sourcing is critical to getting the right products without overspending.
What is Market Intelligence in Procurement and Why is it Important to IT Buyers?
Procurement market intelligence encompasses the gathering and analysis of market trends, supplier capabilities, pricing benchmarks, and vendor risks. It’s a critical part of the due diligence and preparation required to select the right supplier and SKUs at the right price. Without this information, buyers are all but guaranteed to overpay for IT purchases and renewals.
This isn’t hyperbole. Our procurement market intelligence team has analyzed billions of dollars in actual spend and found that enterprises typically overpay for more than 85% of their hardware, software, cloud, IT professional services, and SaaS purchases. It’s not uncommon for benchmark data and procurement market intelligence to reduce large enterprise IT purchase and renewal costs by 7 or 8 figures.
Market intelligence in IT procurement evens the playing field with IT vendors, arming you with the information you need to negotiate better contracts.
Types of IT Procurement Market Intelligence
Negotiations are stacked in favor of the suppliers. They do a large number of deals and know what the market will bear. In addition, IT contracts today are incredibly complex and change regularly. While suppliers know every detail in their agreements and all the nuances of product use rights, IT buyers typically don’t. Suppliers use this to their advantage. They have a game plan and are well-trained to execute it flawlessly.
Procurement market intelligence is critical to understanding current market dynamics to develop your own game plan and ensure you get best-in-class pricing and avoid overpaying for IT purchases.
Key Components of Procurement Market Intelligence
To negotiate more favorable contracts and lower prices, procurement market intelligence provides you with actionable intel to even the odds.
Market & Competitive Analysis
Market and competitive analysis involves studying the broader market, including trends, pricing, and the competitive landscape. This component helps you down-select the shortlist of viable suppliers for your needs.
Supplier Analysis
Supplier analysis is the process of evaluating the capabilities, strengths, and risks of viable potential and existing suppliers. This involves assessing factors such as financial stability, strategic focus, performance trajectory (up or down – that influences your negotiation strategy), among others.
Supplier analysis helps you identify the best partner for your IT procurement needs, ensuring you choose the right vendor for your business.
Cost Analysis
Cost analysis focuses on understanding the cost structures of products and services you are considering. This includes analyzing pricing models, identifying cost drivers, and comparing prices across different options. For example, you may be getting a good price on a SaaS solution, but dramatically overpaying for support costs.
You need hard data to secure world-class negotiations, including:
- Historical pricing and consumption intel
- Benchmark pricing data for specific products
- Licensing and subscription intel
- Vendor negotiation behavior intel and motivations
Cost analysis helps you define your identify opportunities for cost savings and negotiate better deals. License optimization consulting can also reveal cost reduction for your software, SaaS and cloud services deployments. It ensures you have the best-fit licenses, are matching deployment to actual usage requirements, and know the pros and cons of licensing options.
NPI’s expert IT procurement consulting can help you buy only what you need at the lowest possible rates.
Benefits of Implementing Procurement Market Intelligence
With procurement market intelligence, you can improve your IT acquisition and management strategy in several key ways.
Cost Savings
By providing detailed insights into market pricing, cost structures, and supplier performance, you can make better decisions to reduce procurement costs. These savings can be applied to other resources needed to meet business goals.
Competitive Advantage
With insights into market trends, emerging technologies, and competitor activities, you can remain competitive without overspending. This enables you to adapt your procurement strategies to capitalize on new opportunities and stay ahead of industry changes.
Reduced Risk
Overspending introduces risks. When you overpay or have excess capacity or licenses, you are tying up capital that could be invested in other critical areas. Bad deals don’t get better with age. As time passes, your IT bills add up fast – especially when initial SaaS deals are overpriced and annual increases compound the problem.
Reduced risk translates into more stable and reliable procurement outcomes that help future-proof your investments.
Strategic Sourcing
Strategic sourcing focuses on optimizing the procurement process to achieve the best possible outcomes. When used in conjunction with IT price benchmark analysis, you can be confident you’re getting the lowest possible prices for the products and services you need for initial procurement and renewals.
IT Procurement Solutions with NPI
NPI helps businesses leverage procurement market intelligence to make smarter IT purchases. Our expert team provides IT procurement consulting solutions that include supplier analysis, benchmark pricing intel, cost analysis, and risk management. By partnering with NPI, you gain access to the insights and tools needed to make smarter, more strategic IT procurement decisions.
Contact NPI to optimize your IT procurement negotiation outcomes.
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