Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom and transportation.
BI and analytics are among the fastest growing sectors in the IT marketplace. Researchers at IDC estimate the sector will grow to more than $50 billion in revenues by 2016. From 2013 through 2016, over $200 billion will be spent in this technology segment.
Surprised? Most CIOs are not. They are intimately familiar with the IT investments and resources required to harness the deluge of market, business and customer/supplier data that is proliferating in today's enterprise ecosystem. But, what is surprising is how much companies will overpay for BI and customer analytics purchases and renewals.
NPI estimates that buyers will overspend by as much as 20 percent – that's $40 billion – in the following areas:
- Overpaying for software licenses – Companies continue to pay above fair market value for most BI purchases because it is not a category they have much experience sourcing, and vendor pricing is inflated.
- Big implementation projects – BI implementations are becoming increasingly complex, broad and costly.
- Unchallenged annual cost increases – Maintenance and support costs, as well as subscription renewal costs, are rising year-over-year at rates that are often unjustifiable.
- Ongoing enhancements – The pace of change for most businesses is extraordinarily high, thereby driving the need for constant evolution of BI functionality, reporting and other solution customizations. Exploited well, BI and analytics are powerful value-generators for the business. Embracing this evolving IT segment will likely mean growing budget and resource commitments over the next five years.
Companies must develop a clear strategy for how they will avoid overspending in these areas before making new purchases and renewals, including how they will gain insight into what constitutes fair market pricing and terms. The time spent up front will deliver project savings immediately as well as over the term of the contract.
- Jeff Muscarella, EVP of IT, NPI