Spend less on your IT procurement

Information technology (IT) procurement is a business process encompassing both the purchasing and implementation of the IT products and services an organization needs to operate.

In line with organizational strategy, the IT procurement process begins by identifying technology needs before researching, shortlisting, selecting and eventually purchasing the required products. For business-wide procurement, the organization’s centralized IT department will oversee the process, typically headed by the company’s 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.

The rest of this page will explain the eight steps of technology procurement, some of the challenges and opportunities it presents, and how the Vertice platform can play an essential role for procurement managers.

Why establishing a robust IT procurement process is important

We’ve covered what exactly IT procurement is — but what makes this process so important to your organization? Many systems and technologies underpin modern business operations, but making sure you have the right tools for the job plays a vital role in maintaining competitiveness and driving innovation. This is where a well-structured IT procurement process is invaluable, ensuring you can efficiently and cost-effectively obtain the necessary software and hardware resources essential to business performance and growth.

In today’s rapidly evolving technological landscape, strong IT procurement provides a gateway into the latest advancements. Leveraging the newest solutions can often deliver a competitive edge, while simultaneously mitigating risks associated with outdated or incompatible technologies.

Of course, procurement in IT is rarely plain sailing — particularly given the sprawling technology footprint of the average organization. The scope of IT procurement involves sourcing hardware, software, services, and cloud solutions, each with different requirements and compliance standards. Managing these acquisitions requires a high level of coordination across departments alongside detailed market research and thorough vendor evaluation. Given the sheer volume and complexity of this task, the need for a structured and efficient procurement process is clear.

The consequences of poor IT procurement

The absence of a strong IT procurement process can lead to several detrimental outcomes, negatively impacting business operations in a variety of areas:

• Increased costs – Without a strategic approach, your company may overspend on unnecessary or overpriced technology, or waste money on underutilized services. Worse, you may have to repeat the procurement process if the wrong vendor is selected the first time around.
• Operational inefficiencies – Incompatible or subpar technology can hinder productivity across your organization. Acquired solutions may not integrate well with your existing IT infrastructure, creating roadblocks within business activities.
• Security risks – Poor procurement practices can result in adopting vulnerable IT services and systems, exposing your organization to data exfiltration and cyber threats like malware.
• Compliance issues – Without the necessary due diligence, procured IT solutions may not meet industry or regional compliance requirements. This can lead to financial penalties and damage to your brand reputation.
• Vendor lock-in – Strong procurement practices factor in the risk of vendor lock-in. Without this consideration, your organization might become overly dependent on a single vendor, limiting flexibility and causing issues should the service suffer an outage or be discontinued.

Ultimately, the consequences of poorly-strategized IT procurement lead in one direction: damage to your bottom line. But by implementing best practices, you can not only avoid these risks, but increase performance and productivity by acquiring solutions that align with your business objectives.

The eight steps in the IT procurement process

An effective IT procurement strategy can be distilled into eight steps, as follows:

1. Identify business needs

You’ve identified an area of your organization that’s not operating as efficiently as it could, but what does the team require in order to improve?

The first stage of the process is for the procurement team to meet with end users in the relevant departments to discuss the kind of technology solution they need. If, for example, business needs are for a CRM platform, the IT procurement manager should meet with marketing and sales teams to discuss the requirements.

How will the software be used? How often will it be used and by how many people? What are the key features the team needs from a platform like this? These are the fundamental questions to ask during this first step.

2. Review your existing stack

It’s possible that one of your software providers already offers the solution you need. For instance, the CXM platform Sprinklr is predominantly known for its Social, Marketing, and Insights capabilities, but the company also offers a CCaaS solution. Conduct an audit of your existing stack to see if you can simply upgrade a current solution and potentially save considerable amounts of time and money.

3. Make or buy analysis

This step is a luxury limited to companies that have the budget and expertise to develop their own software solutions. The question here is whether a bespoke, in-house tool can be developed and, if so, whether it would outperform an out-of-the-box product in terms of function and cost. In cases where IT requirements aren’t met by the current market, custom-made technology solutions could be the answer.

4. Market research and shortlisting

For most businesses, the step above is a quick process, with the dial falling on the option to buy in most cases. If it’s the case for you, the next step is market research. Create a shortlist of suitable service providers operating in the space you’ve identified as a need and compare pricing (if available), platform features, integrations, shortfalls, and peripheral costs to consider.

5. Vendor vetting

Once you’ve whittled down the shortlist to a handful of potential vendors, conduct risk analysis on each one. Look at customer reviews, financial stability, and the supplier’s reputation to determine each vendor’s suitability. Are there any security concerns you should know about? Does the vendor share the same values as your business? This last question might not be high on your list, but strategic sourcing means staying aware of current news stories and vetting potential partners responsibly.

6. Prioritization

Organize your potential suppliers into a Top Three list, ranking them all in terms of preference. Once the list is finalized, hand it over to your IT manager or CPO and let the negotiating team head to the table.

7. Negotiation

Negotiating procurement contracts is a key feature of IT purchasing. Set out your stall early, committing your supplier on assurances of customer service, technical support, KPIs and product uptime requirements. Establish the metrics through which both parties can fairly determine the success of the partnership and agree on dates for performance review.

Negotiations also afford buyers the opportunity to try and customize their subscriptions, specifying the features they want from the platform — it might not always be possible, but look for negotiation leverage here.

For example, the platform you’re procuring might come with three subscription tiers; your business requirements mean that the middle tier will suffice most of the time, but there’s one feature included in the premium package that your stakeholders really want. This is the time in the procurement process to ask.

What’s important here is that you strike the right balance. Developing and then managing vendor relationships is essential — you don’t want to push too hard during negotiations with unreasonable requests, particularly if the platform is vital for your ongoing IT needs.

8. Contract signing

Decide whether you want to commit to a monthly or annual subscription. Once both parties are happy, all that’s left to do is sign the contract.

The eight steps outlined above concentrate on the procurement process prior to the purchasing of a product, from purchase requisition to request for proposal (RFP). 

However, IT procurement operations are continuous processes to be maintained at all times — even if you’re content with your current tech stack. 

Modern business technology innovation and competition ensures new products are constantly coming to market. If businesses and IT departments want to capitalize on this innovation, their procurement management process must extend beyond these eight steps. If they neglect to do so, what starts as a robust approach to IT procurement can quickly become static.

To ensure operational efficiency in all areas of procurement, businesses should consider investing in procurement management software to help them carry out the actions outlined below.

Monitoring

Monitor usage data of your existing software stack to see how your team interacts with your product portfolio. In large organizations – where multiple teams and departments various cloud-based software tools like ERP systems and CRMs – understanding how useful a solution is without the relevant monitoring tools can be challenging. 

This process involves astute category management: taking the steps to ensure you know exactly the tools in your stack and how their capabilities relate to your company needs. Is this product still required? Do the relevant stakeholders know the full extent of its power? These are some of the questions posed and answered with close software tool monitoring. 

If a solution has been purchased a long time ago, perhaps under the remit of a previous CPO, its use may become muddled, neglected or forgotten altogether. Monitoring systems ensure this doesn’t happen, providing insight on redundant platforms or redundant features within those platforms. 

Performance analysis

A procurement management system also conducts continuous performance analysis to see whether products and vendors are fulfilling their service agreements. It’s in this analysis that businesses can discover the true value — or lack thereof — of a solution. 

The processes of market research, vendor vetting, and negotiation discussed above are all made with the hope that the product will perform better than any other on the market. But without performance analysis, it’s impossible to tell. 

The KPIs, metrics, and service level agreements negotiated during contract negotiation serve as useful guidance here. If your vendor — or their product — isn’t reaching the standards it’s contractually obligated to reach, then conversations about why this is the case and what needs to be improved should be arranged. 

On the flip, vendors also deserve praise when their product performs beyond expectation. In both instances, detailed analysis of product and vendor performance is required.

Supplier management

Managing relationships with suppliers is essential for productive, collaborative, and long-term partnerships. IT procurement services can overlook this important aspect by focusing only on what will bring the most value to their side of the relationship.

It’s easy to understand how this happens. After all, procurement team concerns lie with their side of the arrangement. The problem with this approach is that it fails to recognize the value of establishing a successful, long-term relationship with a supplier. 

Consider this scenario: your supplier has good relationships with all of its clients, but not with your business (or your procurement team). Contracts and agreements commit your supplier to upholding a basic level of service, but human behavior can influence whether they go above and beyond. Your supplier will always work to preserve the relationships it respects before the ones it doesn’t. 

To extract maximum value from procured IT products, companies must always remain conscious of their suppliers and manage these relationships accordingly.

Reacting to industry and economic trends

For IT procurement management to be successful, businesses must be able to react to changing industry and economic trends. 

Events like the Covid pandemic has rewired business thinking. Where before companies and investors would view growth as the key indicator of business health, there’s now a growing trend that sees sustainable growth as a more attractive prospect.  

In procurement terms, this requires agility and flexibility within procurement workflows: when new products come to market that can boost profitability, businesses that are able to work quickly and cost-effectively towards the purchasing process will benefit the most.

Value creation

High-functioning IT procurement services involve extracting as much value from the products being procured as possible. The standard model of value creation is ROI — the time it takes for a return on the investment of the product to be paid back. 

But companies want to create more value than the initial investment was worth. Without doing so, they may as well not have procured the product in the first place. Finding ways to double, triple, or quadruple ROI within the shortest space of time is where value creation truly lies. 

In SaaS procurement, the best way to achieve this is to ensure all stakeholders understand the strategy behind a product purchase and are committed to making the investment a success.

IT procurement challenges and opportunities

IT procurement presents a list of challenges and subsequent opportunities. When these challenges are approached carefully, resolving them will not only enhance your IT infrastructure, but help to improve wider business operations too.

1. Challenge: Your organization is becoming overwhelmed by its customer touchpoints.
2. Opportunity: Procure a CXM platform and gain greater visibility of the customer journey.

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1. Challenge: Shadow IT is making asset management more difficult and generating new security threats.
2. Opportunity: Implement a robust IT procurement process to gain better insight into your overall IT infrastructure.

1. Challenge: Vendor management is becoming increasingly hard to maintain as services are added to your IT stack.
2. Opportunity: Invest in a vendor relationship management (VRM) platform to develop supplier relationships and improve the vendor lifecycle.

1. Challenge: Vendors obfuscate pricing to set the parameters of negotiation during purchasing discussions.
2. Opportunity: Utilize the Vertice platform for better transparency on vendor pricing and purchase orders.

Essential IT procurement tools

Procurement in IT is a complex task, but managing the process is significantly easier if you have the right tools in place. Here are some services and products you might consider implementing within both your IT procurement team and wider organization.

Communication and collaboration

Strong IT procurement begins by clearly identifying and defining your business objectives. Solutions like Slack and Zoom can facilitate communication between procurement teams, stakeholders, and vendors — and outcomes can be documented on collaboration platforms such as Confluence and Jira.

It’s wise to also have a project management tool in place, so you can accurately track every stage of the procurement process, from supplier research to implementation. Asana and Smartsheet are two popular options.

Market research

Research firms like Gartner and Forrester can provide valuable insights into technology trends, vendor capabilities, and market conditions. Their reports can help guide decision-making throughout your IT procurement process. Gartner in particular is known for its Magic Quadrant methodology that rates solutions based on completeness of vision and ability to execute.

Many procurement professionals seek out real-world user reviews. While these do give a flavor of the strengths and weaknesses of a solution, they’re best taken with a grain of salt. G2 and Capterra are two popular platforms in this category.

Financial analysis and accounting

Strategic IT procurement always takes the financial picture of your business into account. Collaboration with your accounting department is essential here — they can provide the reports and insights necessary for evaluating your existing IT costs and making data-led decisions.

In addition, analytics tools like Tableau can further help with budgeting and financial forecasting, as well as evaluating total cost of ownership (TCO) and return on investment (ROI) later down the line once IT has been purchased.

Compliance and risk management

Compliance and risk management tools are essential for ensuring your organization’s procurement processes comply with regulatory standards and internal policies. These tools help in identifying, assessing, and mitigating risks associated with IT procurement, whether financial, operational, strategic, or compliance-related.

LogicGate, RSA Archer, and MetricStream are some examples of such solutions, offering features like policy management, incident response, automated risk and compliance assessments, and comprehensive recording of procurement activities for audit purposes.

Procurement platforms

There are myriad tools to help with the practicalities of procurement. RFx software can streamline the creation and distribution of RFPs, RFQs, and RFIs, and subsequent evaluation of vendor responses. Contract renewal management can be simplified with tools like DocuSign or Agiloft. Post-procurement and vendor relationship management solutions help you get the most out of your IT providers.

Vertice’s own SaaS Purchasing Platform sits in this category. The solution eases the process of procuring software as a service, offering functionality around contract management, renewals, utilization, and SaaS visibility. It can also play a role in the negotiation phase, with our exclusive pricing benchmarks helping IT procurement teams unlock the best discounts.

Dashboarding

Procurement solutions offer insight and analysis on existing products through centralized catalogs of a company’s existing solutions and their performance. These dashboards drive full-stack observability, enabling procurement teams to easily monitor and compare their software tools. Subsequently, informed decisions on which to keep as they are, which to enhance, and which to retire altogether are vastly simplified.

Contract management

With the average organization now using well over 100 SaaS products on a daily basis, manual contract management has become one of the most expensive and time-consuming parts of the procurement process. Automating this process and leveraging ready-built templates is essential for effective IT procurement management, giving negotiating teams time to prepare for contract renewals and scorecard assessments. 

Security

As with all IT purchases, security is of paramount importance. Procurement solutions are a boon for cybersecurity because they help to eliminate shadow IT — tools that have been purchased outside of established procurement frameworks, often to save time and stimulate higher productivity levels. 

The issue here is that live software unbeknownst to security teams makes monitoring potential security threats extremely challenging. Reacting to vulnerabilities without being able to see them is like taming the ghost inside the machine. In other words, it’s largely impossible. 

This issue is exacerbated if employees have access to company accounts via mobile devices. Procurement solutions remove this threat, stimulating better security across the organization.

How the Vertice platform maximizes IT procurement efficiency

The last challenge in the section above leads nicely into the benefits that arise from using the Vertice platform. Our platform helps optimize SaaS management and spending across your entire supply chain, making it easier to procure, renew and streamline your entire stack.  

By working with us, IT procurement teams are given access to pricing insights across myriad software vendors, uncovering precedents for better pricing than what’s listed on their respective sites. Armed with this information, we’re able to negotiate bespoke deals at optimized prices, generating buyer leverage often absent in IT procurement.

Once we’ve secured the best deal on your behalf and the service is up and running, the Vertice platform provides real-time feedback on product performance. Users will receive notifications when KPIs are — or aren’t — being met, and the system will provide plenty of forewarning of contract renewal dates.

The Vertice platform is the only integrated platform for SaaS and cloud cost optimization. The aim for both of these products is simple: reduce the amount companies spend on IT procurement and management.

Our cloud service uses automations to constantly monitor your cloud environments for cost-saving opportunities; working with Vertice can save your organization 25% or more in IT spending.

For more information on our SaaS Purchasing and Cloud Cost Optimization products, click on the relevant links and get in touch.

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.