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IT Procurement Strategy and best practices
If you’ve been keeping up with our recent posts on IT procurement, it will be no surprise to you that IT procurement is a long process, often involving various key stakeholders and requiring comprehensive knowledge of different IT systems and their compatibility. New IT products and services can also come with a hefty price tag and as such, acquisition should be approach strategically. So, what comprises a successful IT procurement strategy? This blog will explore the six key components of an IT procurement strategy.
1. Laying it all out in the open
First and foremost, IT procurement can be expensive – even more so if you make costly mistakes from improper planning. The first stage of a successful strategy is to identify organisational needs and capabilities through an audit. Often the most effective way of doing this is to interview the leaders of each department and to understand how technology could improve their team’s efficiency. Team leaders will also have the best understanding of current processes, existing suppliers, and the coinciding ROI on these services. The needs identified in these interviews can be collated to also ascertain inter-departmental challenges.
As well as current issues, various models can help you to identify future threats and opportunities. This includes SWOT analyses of Porter’s Five Forces. At this stage it’s also important to consider the current market, including any IT systems your competitors are using so that you can ensure that, at a minimum, you’re matching their capabilities and maintaining competitivity in the market.
2. Planning for optimal technology procurement
Once you’ve ascertained the current status quo, the next step of IT procurement strategising, is to make a plan.
This should include:
Setting objectives: what does the process aim to achieve? Which aspects of the business are you looking to replace with new IT solutions and why?
Selecting an operating model: how will the procurement process be managed? Will all acquisitions be sought internally or outsourced through an IT procurement agency?
Supplier acquisition: will you seek a single supplier to satisfy all procurement needs or will you need multiple suppliers? If the latter, will you also require a service integrator?
Execution method: if various new IT supplies and / or services are being sought will you take a staggered approach (to allow for employee adaptation) or will you implement all new services simultaneously?
3. Assemble a team & develop an IT governance framework
Running a large-scale IT procurement project – or even a firm-wide IT transformation – is an extremely time-consuming process, and one which should not be embarked on without a dedicated team in place to manage the various aspects of the project. This includes a project manager, procurement experts, technical experts, legal experts, and a due diligence lead.
One key aspect of project team assembly that businesses often miss out, is the assemblance of an IT governance framework. Put simply, IT governance (ITG) is defined as the processes that ensure the effective and efficient use of IT in enabling an organization to achieve its goals. Within the scope of IT procurement, the IT governance framework plays a large role in the operational management of the project – deciding how the project is managed to best serve the company’s goals and maximising the potential of successful contract implementation with suppliers.
4. Consider the technology implementation
Transitioning from one service provider or solution to another can have organisation-wide impacts. Planning for any transitions should be started early on within the project scope to minimise implementation issues. Within IT procurement there are three main groups to consider when implementing a new product or service:
Existing suppliers: when do any existing supplier contracts end? How will the transfer from incumbent suppliers to any new suppliers be managed to avoid downtime? Typically, suppliers for any new services should include within their proposals any transition plans to take over existing services. Nonetheless, this is a joint process and businesses must play an active role in managing the overall process to ensure a smooth transition.
Employees: If you’ve read our recent post, ‘IT Transformation Procurement’, you’ll be aware that one of the biggest inhibitors to successful IT implementation is the inability of employees to swiftly adapt to new products or processes. This can be mitigated through careful planning and sufficient training on new products before they are implemented across the organisation.
Customers: It is also crucial to consider whether any new IT acquisitions will directly or indirectly impact customers. This may include things such as new customer data management software or front-end changes to your website. Any changes that impact users should be communicated to them through sufficient means such as an email or letter.
5. Watch out for hidden costs
Beyond initial planning stages, the next step in an IT procurement strategy is to consider the actual procurement of new supplies. However, unlike other areas of procurement, IT procurement can be particularly complex owing to the various hidden – or lifecycle – costs associated with the acquisition of new products.
As such it’s important to pay specific attention to such costs when evaluating tender proposals through agreeing on an appropriate methodology to assess each proposal. To be clear, new suppliers should not be assessed on initial acquisition cost alone. A common way of reviewing proposals involves consider the total cost of ownership (TCO). This includes consideration of:
- Purchase cost
- Delivery
- Installation
- Training
- Operation labour
- Maintenance
- Upgrades
- Security
Aside from cost factors, innovation, and the suitability of the product for resolving client needs should also be key considerations. Technology moves at a rapid pace and any new IT supplies should be able to keep pace with new trends and industry developments.
6. Know when to get help
All in all, the IT procurement process is arduous and riddled with many obstacles and much room for error. In most cases, organisations do not have the required skills and niche experience in-house to manage IT transformations and procurement in the most time and cost-effective manner.
Knowing when to seek external help from IT procurement experts is, in and of itself, a key aspect of strategic procurement management. Although external help may seem like an up-front investment of money and effort, the long-term benefits are significant in terms of ensuring a quality transition from existing organisation processes to new IT solutions, aligning stakeholder interests and capabilities and identifying the potential for success throughout the project. Experts can also offer a wealth of experience and niche product knowledge that allows them to make more strategic recommendations that reduces costs and enhances integration abilities.
How we can help
We can help your business understand what your true requirements are before you make any decisions. Our expertise allows us to assist you when it comes to utilising proper procurement practises that will pay dividend. We can guide you in reviewing your existing technology contracts and what to look for in new ones, so you avoid any automatic price increases, capacity limits, cancellation restrictions and beyond.
Choosing the best vendor for your business can be an overwhelming process. We can help with market research and negotiating price to get you the best deal because we have an extensive knowledge of the market. Once you have decided on your IT requirements and defined the products needed, we can assist with researching appropriate suppliers, contacting them for formal proposals, negotiating your terms and ensuring that penalties are in place if a supplier doesn’t perform. We also offer to oversee the project from start to finish – managing your contracts and leading the transition process to ensure that new systems are delivered on time without supplier disputes.
For further advice or an initial consultation please get in touch at info@athena-commercial.co.uk.
