Will You Overpay for These IT Purchases?

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

IT spending is coming back to life -- but will today's businesses buy more wisely? One way to improve how well you source IT is to better understand which IT purchases are more susceptible to overspending. Based on NPI's insight into current vendor pricing and enterprise spending behavior, we believe companies will overspend the most on the following types of purchases in Q2:

  • Cloud Computing & Hosting: In the rush to leverage cloud, many companies fail to evaluate the best pricing model for their business. Gotchas like data and service portability constraints lead to vendor lock-in and poor leverage.
  • Storage: With the volume of enterprise data skyrocketing, most storage purchases are hasty. Strategically minimizing demand and addressing costly issues such as data cleansing will significantly reduce storage costs.
  • Business Intelligence: I covered this in my last post. High demand has allowed BI vendors to get away with unclear ROI and costly implementations. Beware of inflated ROI claims and buying too much functionality.
  • Microsoft Enterprise Agreements: A fierce loyalty to Microsoft and annual support cost increases make overspending on your MSEA easy. To reduce these costs, inventory licenses, categorize users, and only buy products you need.
  • Wireless: The average enterprise overspends by as much as 20-50 percent on wireless. The top culprits are paying consumer rates, not negotiating for incentives, failure to pool minutes and failure to audit usage monthly.
  • Professional Services: IT budgets and projects may be bouncing back, but hiring hasn't. Enter professional services. Without insight into fair pricing for this difficult-to-manage spend category, companies can expect to overpay.
  • Data Networking: High pricing, vendor lock-in and poor planning are common as companies hastily invest in bandwidth solutions to handle high traffic volumes. Bring in fresh competition and analyze your long-term bandwidth needs for maximum negotiation leverage.
  • End-user Computing: Major advances in speed, virtualization and cloud computing may have left your desktops, laptops and software in need of an upgrade. But, before you invest, understand how new computing trends factor into your long-term IT strategy.
  • Contact Center: The pressure to converge phone, chat, email and social media in the contact center has many IT departments scrambling. To prevent overspending on your next VoIP or analytics purchase, be sure to gain insight into fair pricing and terms.
  • SaaS: Minimum purchase clauses, data ownership/migration costs and exorbitant renewal rate increases can negate the savings of SaaS before the ink is dry. Be crystal clear on terms and who's responsible for what -- as well as compare the long-term savings of SaaS to traditional software models -- before you buy.

-- Jeff Muscarella, EVP of IT, NPI

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