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The IT Procurement Process: What It Is and Best Practices
What is IT Procurement?
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 performance
- Reduce, manage and forecast IT costs
- Minimize technical, security, compliance, and financial risks
- Improve market competitiveness and overall operational efficiency
- Comply 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 What was the best available product a few years ago might be woefully outdated today.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 services
- Vendor reputation and customer satisfaction
- Pricing and licensing options
- Customer service and support
- Transition assistance
- Reliability (proven uptime and performance)
- Compatibility with existing systems and workflows
- Scalability
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.
Negotiation and Contracting
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:
Leveraging Data and Analytics
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.
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