What are the Trends Shaping IT Sourcing in 2016?

By Jon Winsett

CEO, NPI

April 15, 2016

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What’s driving the evolution of IT sourcing right now? NPI’s research into more than 600 sourcing organizations identified these 6 trends.

1. Licensing complexity outranks pricing. While pricing disparity continues to be a leading culprit of overspending, it’s quickly being eclipsed by vendor licensing complexity (and, for the telecom category, program complexity).

2. Transition to the cloud is tough to navigate – especially with incumbent vendors. In 2016, many businesses will find themselves doing business with these vendors for the first time with no insight into the vendor’s pricing, contractual and negotiation behavior, and limited understanding of the emerging sub-category.

3. IT Sourcing is now its own discipline – and a broadly accepted one. With a few exceptions, until recently IT Sourcing was lumped into a business’s general indirect procurement function. That has been changing, and in 2016 the norm will shift as IT Sourcing becomes its own “official” sub-discipline in most best-in-class enterprises.

4. Executive decision makers demand more transparency, process and rigor when it comes to spending IT dollars. The confluence of several factors has made IT spend management a boardroom topic. The decentralization of IT spend (and, conversely, the rise of unsanctioned spending) has wrought havoc on technology cost control. Departments no longer need the company’s IT resources to purchase and install software – not when a manager can sign up for cloud-based software using a credit card. Another factor is the speed at which IT is required to meet business and operational demands.

5. Third-party sourcing validation is no longer a nice-to-have; it’s a best practice. New technologies, new vendors, greater licensing complexity and pricing disparity – these are just a few reasons why best-in-class sourcing organizations are seeking third-party validation for their IT purchases. This gives them access to IT price benchmark data, vendor-specific cost reduction intelligence across a broad set of enterprise vendors, and PhD’s in licensing for vendors such as Microsoft, SAP, IBM and Oracle.

6. Greater demand for accelerated IT rationalization during M&A transactions. The M&A environment continues to be white-hot in almost every industry and its implications on IT Sourcing are two-fold. Companies in the midst of a merger, acquisition or divestiture must be able to evaluate the impact of a transaction on their IT contracts quickly and effectively (then negotiate accordingly). And, what if an important IT vendor is being acquired by a third party? In these cases, customers must be prepared to mitigate the risks of acquisition of strategic IT suppliers.

What other trends would you add to this list?