SIG Podcast: The Sourcing Industry Landscape, featuring Jon Winsett, NPI CEO

As Winsett explained, technology has become the lifeblood of modern businesses, with IT spend now topping $5 trillion globally. This has thrust IT procurement into the strategic spotlight, with savvy sourcing teams playing a crucial role in managing this sprawling and complex area of spend.

One of the biggest challenges, according to Winsett, is the relentless tactics and “tricks” employed by major technology vendors. Here’s what he had to say: “You’ve got some of the biggest companies in the world, tech companies, manned by some of the brightest minds in the world with one singular objective, and that is to extract the maximum revenue out of the coffers of any enterprise.”

This includes everything from convoluted licensing terms that change quarterly to aggressive auditing practices that can hit companies with millions in unexpected fees (often as a result of those convoluted licensing terms). Winsett pointed to the recent Broadcom-VMware situation as a prime example of category tactics.. VMware, upon its acquisition by Broadcom, hiked prices by 5x or more for some customers. When a customer’s annual spend is in the millions with a vendor like VMware, an unbudgeted 5X increase gets C-suite attention.

Even more concerning is this vendor behavior is trending. Vendors are paying attention to the Broadcoms of the world to see how these tactics play out. So far, it’s working. The days of typical 10% price uplifts may soon be replaced by 5x to 10x cost hikes. Another case in point? Oracle’s new employee-based license metric for Java.

To combat these challenges, Winsett offered several pieces of advice for IT procurement professionals:

1. Benchmark pricing: This can save up to 50% just by understanding where you stand compared to the market.
2. Conduct license position and optimization assessments: Especially for strategic software estates like Microsoft, Oracle, IBM and SAP, it’s crucial to fully understand your entitlements and how you’re actually consuming the licenses. Proactive assessment of large software deployments gives you the data you need to accurately define renewal baseline requirements, so you don’t renew more than you need. Equally as important, it allows you to identify and remediate compliance issues before the vendor gets involved.
3. Leverage AI: New AI-powered tools can provide valuable supplier intelligence, workflow automation, and data cleansing capabilities to support the procurement process. It has the potential to save companies millions of dollars and thousands of manhours a year.

For more insights on how IT sourcing can more effectively negotiate with tech suppliers, listen to the full podcast.