IT Procurement: Streamline your process for maximum time and cost savings.

What is IT procurement?

By definition, information technology (IT) procurement is a business process that includes both the purchasing and implementation of the IT products and services necessary for an organization to operate.

A typical IT procurement process begins with identifying technology needs, followed by researching, shortlisting, selecting, and eventually purchasing the required products or services. In many organizations, the IT department will oversee the process, often under the direction of the Chief Procurement Officer (CPO).

Robust IT procurement practices are essential for cybersecurity, employee satisfaction, productivity, optimizing costs, and for achieving business objectives. IT procurement best practices also help to combat shadow IT.

In this guide, we’ve covered exactly what information technology procurement covers, along with a standard IT procurement process, best practices, and the metrics you should be tracking.

What does IT procurement cover?

IT procurement covers a broad range of technology-related products, services, and solutions used across modern organizations. Some of the key areas it encompasses include:

• Hardware – This includes physical equipment such as servers, desktops, laptops, printers, networking devices, storage devices, and even mobile devices.
• Software – Accounting for 12.5% of total organizational expenditure, software has fast become critical to the success of any organization and has subsequently become a core focus for IT procurement. While this typically refers to cloud-based software – or SaaS – many companies still invest in on-premise software as well.
• Cloud solutions – Cloud-based services and platforms, such as AWS, Google Cloud and Azure, also account for a significant amount of spend within the average organization, and have subsequently become a core focus for many procurement teams.‍
• IT services – This can include consulting services, development and customization services, and IT maintenance and support.

The IT procurement process

The exact number of stages within an IT procurement cycle may vary based on the level of detail required. This is often dependent on whether the software purchase is deemed strategic or tactical.

Cloud solutions and ERP platforms, for example, are often classed as strategic purchases given their financial cost and their complex requirements, whereas an HR platform may be considered an example of tactical procurement, as it’s typically lower in value, albeit still important.  

For many IT purchases, however, Vertices considers there to be five stages. ‍

1. Needs identification

The initial stage in any IT procurement process is recognizing a need for a new product or service, and submitting a detailed purchase requisition form outlining the specific requirements. This should include details such as:

• The name of the requestor, their department, and the date of the request.
• A description of the product or service being requested and if applicable, the quantity.
• A clear explanation of why the product or service is needed and how it will be used within the organization.
• Vendor preference (if any). If the employee is requesting a specific vendor, then it can help to mention any previous experience they have with them.
• For SaaS purchases, the number of licenses or user seats required.
• The estimated total cost of the product or service, including any potential recurring fees.
• The desired date or timeframe by which the product or service is needed.

2. Evaluation and shortlisting

Once the request is approved, the procurement team will begin evaluating the requested solution, along with other potential suppliers.

For strategic purchases, this stage typically involves a more detailed evaluation process, with input from multiple stakeholders across the organization. In contrast, tactical purchases may require a simpler evaluation.

However, the approval process will vary depending on the nature of the product or service. For instance, software platforms that handle sensitive customer data may require additional approval from IT and compliance teams, regardless of the product’s cost, to ensure security and regulatory compliance.

For software purchases in particular, companies should also ensure that there aren’t any other platforms in use across the business that serve the same purpose, as this could lead to redundant costs and inefficiencies.

‍3. Solicitation and contract negotiation

If the initial request didn’t specify a particular vendor, you may be left with a shortlist of potential suppliers. If, however, a vendor was specified and passed the evaluation stage, it’s wise to establish a BATNA (Best Alternative to a Negotiated Agreement) as well.

Not only does this give you more leverage in negotiations, but it ensures you’re not accepting an unfavorable deal.

Before entering into any conversations it is, however, crucial that you’re thoroughly prepared and have a solid negotiation strategy. This involves:

• Engaging early – Allow ample time to secure the best possible deal and avoid losing buying power.
• Arming yourself with leverage – Understand what other companies are paying for similar subscriptions, as well as the terms of their contracts.
• Identifying your key requirements – Be prepared to compromise on less important terms, but know your limits and set clear boundaries for contract terms you’re not willing to accept.  

‍Take a look at a full list of contract clauses to look out for and negotiate on.

4. Contract finalization

Once the negotiation stage has concluded and both parties have agreed to the key terms, the contract finalization stage begins. This stage of the IT procurement process specifically involves:

• Legal review – Before signing, certain contracts should be reviewed from a legal standpoint to ensure that the document is in compliance with local laws and regulations and that there are no ambiguities or potential risks in the terms and conditions. Advanced IT procurement software platforms can help speed up this process by automating contract review workflows, ensuring that all required legal clauses are included, flagging potential compliance issues, and providing templates that are already aligned with regulatory standards.

• Clarification of terms – Any remaining ambiguities or uncertainties in the terms can be addressed. This could involve revisiting specific clauses, for example, deliverables or payment terms to ensure that both parties are on the same page and that all expectations are clearly defined.
• Final approvals – After the contract has been legally reviewed and all terms have been clarified, it should be submitted for final internal approval within the organization. This may involve sign-offs from senior management, procurement, and finance teams.
• Contract signing – Once both parties have agreed to the finalized terms, the contract should be signed by authorized representatives.‍
• Document management – The final agreement will need to be saved for record-keeping purposes.

5. Review and renewal

Since software is often a recurring purchase, the review and renewal stage of any IT procurement process is critical in determining whether a contract should be renewed, amended, or terminated.

Given that 89% of all contracts contain auto-renewal clauses, it’s essential to track these renewal deadlines, along with the required notice periods. This allows enough time to evaluate the platform and determine whether the existing terms still meet your needs. It’s also important to assess the utilization rates for each tool to ensure that the number of licenses you’re subscribed to are still required.

Finally, with software prices rising by 11% each year, a thorough review period provides an opportunity to leverage pricing benchmarks, using these insights during negotiations to mitigate the impact of SaaS inflation.

‍The cost of poor IT procurement

Without a streamlined IT procurement process, there can be wide-reaching consequences. These will often include:

Financial losses

• Overpaying for SaaS – Software prices are rarely set in stone, with many organizations paying an average of 30% more for their tools than necessary. One of the major reasons for this is lack of negotiation, which is often a result of procurement teams leaving renewals to the very last minute.  
• Hidden costs – Without a structured IT procurement process, organizations often won’t leave themselves enough time to properly review a contract, and as a result, they may unknowingly agree to unfavorable terms and hidden costs. This may include overage charges, auto-renewals, setup and implementation costs, third-party integration fees, and support costs.

Get a better idea of the hidden SaaS costs responsible for driving up spend.

• Maverick spending – Without proper procurement oversight, employees are more likely to make unauthorized IT purchases. This not only creates potential security risks, but can result in duplicate software and unwanted auto-renewals, while also leaving organizations overpaying for licenses.‍
• Missed opportunities for cost-savings – Not only are SaaS and cloud solutions significant outlays for nearly all organizations, but the annual price increases of 11% and 35%, respectively, mean that companies must continually seek ways to optimize their tech stacks. Achieving this level of optimization is only possible with effective IT procurement practices.

Wasted time

• Reduced productivity – A slow and inefficient procurement process can significantly hinder employee productivity in several ways. For end users, delays in obtaining the necessary tools, hardware, or services can prevent them from meeting deadlines or accomplishing their objectives. For those managing the IT purchasing process, the constant back-and-forth and administrative tasks can lead to burnout and frustration, diminishing overall job satisfaction.‍
• Human error from manual intervention – Data entry mistakes, missed or overlooked approvals, and errors in contract management are just a few examples of the issues that can arise without an automated procurement process. Such mistakes can waste a substantial amount of time and ultimately prolong the procurement cycle.‍
• Delays in the approvals process – When organizations take a manual approach to handling IT procurement, approval delays are somewhat inevitable. This is because procurement often requires input from multiple departments, and without automation, the approvals often get held up as a result of staff absences or competing priorities. As a result, the approval process for IT purchases tends to become slow and inefficient.

Find out how one company accelerated their procurement cycles by 55% by automating approvals.

Weakened vendor relationships

• Lack of clear communication – Inefficient procurement processes can leave vendors feeling out of the loop or unclear about expectations, in turn leading to misunderstandings, missed deadlines, and ultimately frustration on both sides. This lack of trust can subsequently weaken the relationship.
• Strained negotiations – If the IT procurement process is overly complicated or lacks clear terms from the start, it can lead to strained negotiations. Vendors may become less flexible or open to offering discounts or favorable terms, as they may perceive the procurement team as difficult or uncooperative.

Compliance and legal risks

• Violation of contractual obligations – Poor IT procurement processes can lead to improperly negotiated contracts, which may result in your organization failing to meet its obligations. As an example, if payment terms are not clearly defined or agreed upon, you may inadvertently breach the contract, leading to potential legal action or financial penalties.
• Non-compliance with regulatory requirements – Many industries have strict regulatory frameworks that govern information technology procurement practices – an obvious one being data protection laws. In certain sectors, improper vendor selection or failure to conduct thorough background checks on vendors could result in violations of compliance regulations such as HIPAA or GDPR.

IT procurement best practices

Establish a centralized IT procurement process

By centralizing your procurement process, you stand to achieve consistency, compliance, and enhanced visibility across all IT purchasing activities. Not only does this reduce redundancy, but it also ensures adherence to company policies, and makes it easier to track spending.

Leverage data and analytics

Make more informed decisions when it comes to sourcing new vendors and renewing your SaaS applications. By leveraging advanced data and analytics, you can optimize your purchasing strategies, track utilization rates, monitor contract compliance, and eliminate shadow IT, in turn enhancing cost efficiency and driving value across your organization.

Invest in procurement technology

The right procurement management platform will not only enable you to automate your approval processes and provide you with full visibility of your entire software stack, but it will also help you identify cost-saving opportunities and optimize vendor management.

For guidance on how to choose the right IT procurement platform for your business, check out this list of considerations.

Get a detailed analysis of the SaaS Procurement and Management Platforms in this Lionfish Tech Advisors Report.

Consider outsourcing software negotiations

Not only are negotiations often incredibly time-consuming, but many internal teams lack the leverage and experience to secure the very best deals. By working with a procurement partner to negotiate on your behalf, you can gain access to specialized expertise, leverage vendor relationships for better terms, and ultimately secure more favorable pricing and contract conditions.

Keep in mind though that not all software procurement providers will offer this as a core part of their service, so it’s worth evaluating your options to ensure you’re partnering with one that aligns with your strategic needs.

See how one company saved 50 hours on negotiations in three months by partnering with Vertice.

IT procurement metrics

With organizations now spending a substantial amount of their total business expenditure on IT software, hardware, and services, it’s unsurprising that IT procurement has become a core focus for optimization and strategic value creation. After all, it’s essential for controlling costs, improving efficiency, and ensuring that technology investments align with long-term business goals.

To achieve these objectives, however, companies need to be tracking the right IT procurement metrics and KPIs.

These include:

Cost management metrics

• Cost savings – The reduction in spend compared to the original budget or previous contracts, indicating how well procurement is negotiating and optimizing costs.
• Cost avoidance – How much cost has been avoided through better negotiations, strategic sourcing, or by implementing other cost-effective solutions.
• Procurement ROI – The return on investment for procurement activities, assessing whether the cost-saving initiatives or investments in IT have provided a measurable financial return.

Spend visibility and control metrics

• Spend under management – The percentage of total IT spend that is actively being managed by the procurement team, reflecting the organization’s ability to monitor and control procurement spending.
• Maverick spend (shadow IT) – Identifies purchases made outside of the official procurement process. High levels of maverick spend often indicate a lack of control, or poor compliance with procurement policies.
• Total spend by department – Breaks down spending by department, allowing for better budget allocation and identifying areas of overspending or inefficiency.

Procurement cycle and process efficiency metrics

• Time to contract renewal – The length of time it takes to renew a contract with existing suppliers. Lengthy renewal processes may signal inefficiencies or lack of preparedness.
• Time to procure – The time from the initial request to the final purchase, helping to identify bottlenecks and inefficiencies within the procurement pipeline.
• Procurement cycle time – A measure of how long it takes to complete an information technology procurement process, from identifying a need to receiving or implementing the goods or services. Find out how one company accelerated their procurement cycles by 55%.

Contract management and optimization metrics

• Contract compliance rate – Tracks how well both parties are adhering to the terms of a contract. Non-compliance can lead to missed savings, subpar service delivery, and other legal and financial risks.
• Contract utilization rate – How effectively software is being utilized, helping to identify underused resources and potential inefficiencies.

Get access to the 11 procurement metrics that high-performing teams are tracking.

How Vertice can enhance IT procurement efficiency

As a Procurement Orchestration Platform, Vertice not only provides procurement teams with the tools needed to streamline the IT purchasing process, but we also enable you to manage and optimise your entire tech stack from a single location.

By partnering with us, you can specifically:

• Reduce maverick spend with access to customizable intake forms.
• Eliminate delays in your procurement approvals process with automated workflows.
• Save an average of 30% on your software spend.
• Access exclusive pricing benchmarks that can be leveraged to secure you the very best deals on any contract. See how we saved one company $155,000 on a single contract.
• Rightsize your contracts for additional cost savings by having total visibility of your organisation's SaaS utilization rates.
• Save a substantial amount of time by letting our expert procurement team handle negotiations on your behalf.

See Vertice in action by taking a self-guided tour of the platform.

IT procurement is an expansive topic — if you’re looking for more information on related concepts, check out some of our other guides below.

• Shadow IT – Learn more about maverick purchasing outside official procurement processes, known in the SaaS world as shadow IT, and how to tackle it;
• Vendor relationship management – Find out how building and maintaining positive relationships with your IT vendors can pay dividends in the long run;
• SaaS contract negotiation – An essential part of SaaS procurement, contract negotiation is your chance to land the best deal for the products or services your business requires;
• Purchasing strategy – A key component of the procurement process, purchasing refers specifically to the point of transaction between buyer and seller and often necessitates its own unique strategy;
• Category management – Discover how this strategic approach to procurement, focusing on specific categories of goods or services, can help you maximize value and efficiency;
• Cost avoidance – Our guide to cost avoidance, a practice often included in strategic procurement that involves taking pre-emptive steps to reduce spending over the long term;
• IT procurement outsourcing – Learn about the potential benefits of outsourcing your IT procurement to a third party, a measure which could save your business time and money while leveraging the knowledge of industry experts.