Every month, it seems like there’s new technology focused on streamlining some part of enterprise work. But these innovations also create organizational challenges that may not be obvious to the business units purchasing them. From inflated spending and hardware incompatibility to poor data security, overseeing IT sourcing is hard work. The good news is that an intentional IT procurement strategy can get ahead of these issues. In this guide, we’ll walk you through producing a strategy you can rely on for years to come.
What is an IT procurement strategy?
An IT procurement strategy is a formal approach to purchasing hardware and software while protecting profitability, data security, and process efficiency. Typically, this strategy is closely tied to organizational goals and focuses on controlling purchasing channels as opposed to letting each business unit buy their own tech directly.
Why do you need a procurement strategy?
Letting each business unit build its own purchasing operation is the fastest recipe for inflated spend, competing supply chains, and unreliable inventory. A centralized procurement strategy avoids these crippling issues by centralizing the organization’s supply chain and managing it as a single entity that works for the business instead of against itself.
In IT procurement, this usually looks like:
- Choosing a common computer manufacturer
- Deciding which operating system the company will use across devices
- Vetting proposed tech investments for security issues
- Researching integration possibilities
Procurement strategies for the IT industry
As we’ve mentioned, the pace and complexity of technology force IT professionals to be multi-faceted in how they approach purchasing strategies. Below, we’ve listed several of the angles procurement professionals should consider when building their strategies.
Strategic sourcing
Strategic sourcing is the process of managing vendors to build a valuable, effective, long-term supply chain for the business. In IT procurement, this looks like piecing together a network of hardware and software providers that balances quality, cost effectiveness, and security while still powering the company’s daily operations.
Supplier relationship management
Strong supplier relationships are the glue that hold a supply chain together, especially when interruptions and price increases come along. In IT, these relationships are even more important because they can come with influence.
Technology companies are always looking for innovations that will serve their customers better. The customers that vendors hear from most often naturally have the most influence over product roadmaps.
Contract management
Contract management is one of the most effective ways for Procurement to bring value to the business. It involves finding categories where formalized vendor relationships will benefit the business, negotiating favorable terms, and monitoring existing contracts for renewal and expiration dates.
Some of the benefits of contract management in IT procurement include:
- Securing preferential pricing or free software features
- Establishing a guaranteed flow of hardware like computers
- Negotiating SLAs, support response times, and security guarantees
- Reducing supplier fragmentation and tail spend
Risk management
Risk mitigation is one of the most important factors of any IT procurement strategy. However, GDPR regulations and their hefty fines for security incidents aren’t the only risk factors that matter when purchasing hardware and software. You should also watch out for
- Vendor financial health and risk
- Human rights violations in the supply chain (even downstream)
- Sustainability, scope-3 emissions, and waste
- Software reliability and hardware fail rates
Risk in today’s supply chains is multi-faceted and complex, so some of these factors will have more or less impact depending on your industry, geography, and organization size. However, we recommend monitoring as many parts of your risk matrix as possible to avoid governance issues, CSR missteps, or regulatory non-compliance.
Learn how SpendHQ is helping companies gain a composite view of risk in their supply chains.
Cost optimization
Success in Procurement starts with saving money. But IT procurement professionals must balance cutting costs with innovating and gaining a competitive edge in the market. Thankfully, there are several ways to cut costs without opting for low-quality products:
- Category management
- Contract negotiations
- Tail spend reduction
- Maverick spend mitigation
- Cost avoidances
Technology roadmapping
Hopefully the march of technological progress won’t stop any time soon. So an IT strategy that’s only concerned with the next 12 months is insufficient. Instead, think about where the company is heading and what kinds of tech will help it get there and then go even further. With that vision in mind, develop your strategy as a foundation for that goal. What investments now will clear the way for cutting edge investments in five years? What problems do you see arising as the company scales? Get in front of these questions now, and you can set the stage for major growth and industry-defining efficiency in the future.
Demand management
There will always be someone with a broken computer, or a “game-changing” software investment. Demand management focuses on predicting and preparing for these needs. You can’t predict them perfectly, but if you can understand when demand is likely to peak, you can prepare budgets, buying processes, or even bulk purchases to maximize efficiency.
Green IT procurement
As technology becomes more powerful and lucrative, there are new environmental concerns emerging about its development. Advanced computing demands high amounts of energy and can increase CO2 emissions. The chips that power next-generation technology rely on controversial mining practices. In the coming years, IT procurement professionals will need strategies for balancing ESG with innovation, efficiency, and business needs.
Supply chain management
Supply chain management in IT procurement may look different than in other areas of sourcing, but it follows the same principles. Organizations need reliable, fast PO processes to ensure vendors are paid. They also need to monitor for supplier fragmentation and tail spend to keep costs under control. Finally, IT procurement should still place a premium focus on supplier relationship management and contract negotiations.
Innovation procurement
Enterprise technology is changing the way the world works every day. That’s not a tagline—daily processes look completely different than they did 10 years ago. Companies that successfully adopt technology early can find themselves with a significant competitive advantage, but innovation can be risky too. Innovation procurement, especially in IT, allows procurement to vet and de-risk these investments.
Steps to create a procurement strategy
With so many angles to consider, how do you bring the various parts of an IT procurement strategy together? Below, we’ve outlined a nine step process your organization can use to build, test, and implement a long-term strategy.
Leverage procurement software for efficiency
Because Procurement data is so broad and complex, procurement software is the most efficient way to develop, implement, and scale your strategy. It will offload the tedious, repetitive parts of IT procurement so you can focus on developing your strategy. Procurement software is also the only feasible way to undertake the first step in the strategy process: analyzing spend.
Conduct a comprehensive spend analysis
The first step in building a procurement strategy is to understand organizational spending. To do this, you’ll need to consolidate 100% of your spend into a spend cube that you can analyze. A spend intelligence platform will automate the entire process, from data consolidation to analysis, giving you a thorough understanding of spend and the initiatives you can undertake to improve it.
Identify core business needs
Once your analysis has given you an explorable spend cube, finding your opportunities and areas that need your attention will be easy. At this point, you may find that there are more opportunities than your team can undertake. We recommend filtering your options through organizational goals. This will help you prioritize resources and maximize Procurement’s contribution to the business.
Evaluate market trends and supplier conditions
Much of IT procurement involves accommodating market trends and the investment needs of business units. To stay flexible, enrich your new-found spend insights with stakeholder conversations and market exploration. Going the extra mile will position procurement to help business units innovate. It will also poise the business to become an early adopter or get ahead of unfavorable market changes.
Establish clear and measurable objectives
At this point, you understand your opportunities and challenges. Now it’s time to determine what you want your strategy to accomplish. We recommend building off the basics from the list below:
- Speed up PO approvals
- Reduce maverick spend and non-compliance
- Increase contract impact percentages
- Secure cost avoidances
- Minimize supplier fragmentation and tail spend
- Contribute to one or more of the company’s ESG goals
- Minimize your cyber risk profile
Of course, “progress” means little without some way to measure and benchmark it. You need to attach numbers to these objectives so you can track progress and iterate in the future. This list of procurement KPIs will help you identify the metrics you should be tracking.
Draft a tactical procurement plan
Once you know what you want to accomplish, you can decide the daily tactics that will create your desired results. Common procurement tactics include:
- Consolidating suppliers
- Monitoring purchase price variance (PPV)
- Negotiating and renewing contracts
- Correcting maverick spend
- Reducing tail spend
- Rethinking scope and materials
Each objective should have at least three tactics that ladder up to it—these tactics are activities that, when done correctly, produce an expected result.
Create well-defined procurement policies
To truly make these tactics stick, cement them in policy. Clarify each process, from purchasing new laptops to vetting large software investments, and ensure all teams understand it. Then, hold people accountable throughout the organization. Policies no one enforces are the ones no one follows. If purchasing managers know your policies matter, they will usually follow them.
Read More: How leading organizations are cracking down on non-compliant spend.
Build a robust digital procurement framework
The penultimate step is to digitize everything you’ve done so far. As much as possible, make every part of the IT procurement process digital with controlled purchasing technology. This will reduce friction, increase buy-in, and prevent value leakage.
Implement, monitor, and optimize your strategy
No amount of automation will ever let you mark a process as “implemented and done.” Procurement is always changing, especially in IT. There will always be new vendors, new needs, and new innovations that shake up your strategy.
However, this reality doesn’t have to throw your IT procurement strategy off course. With uninterrupted visibility into your spend and procurement pipeline, you can iterate on your process in nearly real-time as you watch trends develop. By taking this approach, your organization will mature quickly and produce reliable value for the business.
Building an IT procurement strategy for the future
Now more than ever, a dedicated IT procurement strategy is non-negotiable. The world is filled with exciting innovations, but they come with substantial risks that can make or break your company’s performance and reputation in the market.
While getting it all right is challenging, you can greatly reduce the risk of making bad decisions if you have the right data. With the complex state of modern procurement responsibilities, this is quickly becoming a team’s most important ability, especially in IT.
SpendHQ is the solution 500+ companies around the world trust to turn their data into an actionable asset. Our solution uses a mix of AI and direct procurement experience to consolidate 100% of an organization’s data into actionable intelligence that makes strategy building confident and easy. To learn more, visit our solutions page or see it for yourself on a custom demo with one of our procurement strategy experts.