Achieving the best outcomes in IT purchasing doesn’t begin when the vendor sends a quote. It starts well before that. There’s no end in sight to the upward trajectory of enterprise IT spend. It’s more critical than ever for organizations to focus on purchase optimization early in the IT buying process to eliminate overspending in this complex category and to speed up procurement cycles so you get to the business benefit faster.
The first, and perhaps biggest, mistake companies make is waiting until the first vendor proposal before bringing IT procurement into the mix. Want to overspend by 7 or 8 figures? This is a surefire path to ensuring it happens.
High-performing IT procurement teams know that success requires much earlier involvement. By adopting a proactive “T-minus X” approach, where “X” is the preparation time needed for optimal results, IT sourcing teams can significantly improve their negotiation outcomes. Keep in mind that many enterprise IT vendors have their own T-minus X playbooks and strategies – they start working on ways to extract more revenue at your next renewal before the ink is dry on the last contract.
Here’s a roadmap for identifying optimization and savings opportunities at each stage of the procurement process:
Maintain Full Visibility into What You Own, Key Dates, and Commercial Terms
Start by maintaining clear visibility into your current IT assets, key contract dates, and critical commercial terms.
- Deal-specific: Once business and technical needs are identified, procurement should review the IT portfolio for duplicate or competitive solutions. If alternatives are found, field competitive quotes to maximize existing discounts. This creates competitive pressure, encouraging non-incumbent vendors to offer better pricing and terms.
- Process-oriented: Visibility helps prioritize purchases and renewals based on their urgency, complexity, and deadlines. Allocating resources efficiently ensures enough time for thorough planning and execution.
Conduct Vendor-Specific Research and Preparation
Preparation time for negotiations varies by vendor and transaction complexity. Gather intelligence on the vendor’s historical pricing flexibility, incentives, SKUs, and business dynamics that might influence their negotiation behavior.
Apply Vendor Intelligence
Use the insights from your vendor research to shape your sourcing strategy. Do you move forward with the current vendor, or are there better alternatives? If you stick with the vendor, leverage your research to negotiate a stronger initial quote.
Stay Updated with Supplier Briefings
Throughout the purchasing process, monitor changes in the vendor’s business and the competitive landscape. These shifts can offer leverage points during negotiations, helping you secure better terms.
Analyze Vendor Quotes Thoroughly
When you receive a vendor quote, carefully review it to ensure that it meets your business, usage, and technical requirements. Look out for unfavorable terms and conditions that might signal potential issues.
Benchmark and Develop a Negotiation Strategy
Conduct price benchmark analysis, comparing the vendor’s quote to peer purchases with similar scope. This ensures you’re getting best-in-class pricing and terms. Set clear negotiation targets and align stakeholders around those goals. Use the latest vendor intelligence to inform your negotiation strategy.
Finalize the Deal and Plan for the Future
Once you’ve secured an optimized deal, use the insights gained from this purchase cycle to prepare for the next one. Establish your “T-minus” timeline for future renewals and document key details in your tracking system to ensure continuous optimization. Remember – it’s an ongoing cyclical process, not a one-time event!
Start Early, Save Big, At Speed
By starting the procurement process early and leveraging vendor-specific intelligence, IT buyers can optimize outcomes and secure favorable deals with confidence, reducing cycle time and helping the business drive technology initiatives forward. Proactive preparation is key to long-term success in IT purchasing.
To learn more about the next generation of IT purchase optimization strategies and tactics, download your free copy of IT Procurement 2030: Preparing for a New Era of IT Sourcing. Or contact NPI to learn how we can help you optimize your enterprise IT purchase and renewals.
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