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What We Learned from NPI’s Customer Advisory Board
In a recent gathering of our Customer Advisory Board, IT procurement executives from Fortune 500 enterprises shared insights into the trends and challenges shaping the IT sourcing landscape. These discussions offer a snapshot of the pressures and opportunities they face heading into 2025.
It’s not lost on us that these leaders are under conflicting mandates during a time of historic technological transformation. Harness innovation so the business can better compete. Meanwhile, get more value out of existing IT investments. And do it all while reducing cost and compliance risk.
Here’s a recap of some of the trends and concerns our customers shared during our recent meeting.
Generative AI Adoption – Opportunities and Growing Pains
Generative AI continues to capture the imagination of enterprise IT teams. High adoption rates for tools like GitHub Copilot underscore the technology’s transformative potential. One organization reported dramatic efficiency gains, with employees saving hours on tasks through Copilot integrations with O365 and Dynamics.
However, members emphasized the importance of clean data. Dirty data and poor data governance can lead to inaccurate training models, undermining AI-driven decision-making. Enterprises also voiced concerns about data privacy and immaturity in some products, such as Gemini AI.
In addition to bringing strong IT price benchmarking and negotiation intel to the deal table, leaders shared these best practices:
- License Management: Organizations managing AI licenses in bulk are implementing systems requiring user certification and returning licenses to the corporate “pool” if unused after 30 days.
- Negotiation Wins: It’s still possible to secure AI capabilities at no additional cost by integrating them into larger vendor contracts, a strategy yielding immediate ROI.
SaaS and AI Integration Gains Traction
The integration of SaaS and AI tools is becoming a key focus. Enterprises are leveraging AI-enabled tools to better manage sprawling software environments. These integrations are helping organizations align AI capabilities with broader transformation goals while maintaining visibility and control.
Tail Spend Management
Tail spend (low-value, high-volume purchases) remains a persistent challenge for Fortune 500 companies. Without clear strategies, organizations risk overspending and missing opportunities to consolidate or optimize spending. Tail spend was identified as an area ripe for improved tracking and management to generate immediate cost savings.
Underutilized Licenses, Virtualization, and Renewal Baseline Optimization
Unused software licenses were flagged as a common issue, with companies reporting a significant percentage of certain estate licenses sitting idle. This is particularly true in large SaaS estates. This underscores the need for regular SaaS license optimization assessments that identify unused, underutilized, and no-pulse (e.g. printers, conference rooms, etc.) licenses – especially in advance of renewals.
Virtualization is also a sore spot for cost management. Virtualization teams often neglect or underreport optimization opportunities, leading to inflated renewal baselines. Clients stated that NPI routinely finds 15% (or higher) cost savings opportunities through non-disruptive optimization with vendors like VMware. That’s an important point for anyone with a VMware/Broadcom renewal, where an inflated renewal combined with VMware’s recent licensing metric changes can be catastrophic.
Broadcom Blues
Speaking of Broadcom, they continue to be thorny. Customers are approaching VMware renewals with substantially more rigor since Broadcom’s acquisition. Many are giving their organizations 18+ month runways to evaluate credible alternatives and strategize how to effectively negotiate with a vendor that has been holding many customers hostage. Those customers considering moving licenses away from Broadcom are concerned the vendor will retaliate by raising prices on remaining licenses.
It's not surprising that demand for NPI’s VMware renewal optimization services has spiked in the second half of 2024. Companies are looking for guidance, assessment, and leverage ahead of Broadcom negotiations. Specifically, they need:
- Full visibility into their VMware estate (typically larger than the customer realizes)
- Cost-modeling for VMware’s new core-based metrics and subscription pricing
- Strategies to maximize density and capacity, reducing VMware’s footprint, and mitigating licensing impacts
- Discovery of any compliance issues that may need remediation
Note: NPI finds significant cost savings opportunities – typically 7 figures – in 100% of the VMware renewals we help our clients optimize.
Key Takeaways for IT Procurement Leaders
If we had to boil our conversations down into three key takeaways, they would be:
- Focus on AI Enablement with Strong Cost Management: Develop a roadmap to scale AI adoption responsibly, balancing innovation with privacy concerns and operational readiness. Negotiate world-class pricing while keeping licensing clean.
- Audit and Optimize: Regularly audit software licenses and infrastructure baselines to uncover cost-saving opportunities – especially with vendors like SAP and VMware.
- Tail Spend Discipline: Implement policies and tools to tackle tail spend effectively, ensuring it doesn’t erode budgets.
The coming year promises to be one of the most pivotal yet for IT procurement. After 21 years of advising large enterprise IT procurement teams, we can confidently assert that the stakes have never been higher. We recognize that knowledge-sharing will be crucial as IT procurement leaders navigate new territory and we want to be a facilitator. NPI will be hosting more peer-based events in 2025 – follow us on LinkedIn to stay informed and connected.
