Accenture Spend Trends report – the IT spend category

We mentioned recently the Accenture quarterly “Spend Trends” report, made freely available as a download from their website here, and praised it for its insight in terms of both general economic analysis and information and the category specific sections. Today we'll look at the IT category section.

The main part of that features a review Accenture's outsourcing group carried out using their spend and project data.

" What we found was illuminating: less than 15 percent of the total spend we help clients manage is IT/Telecom-related…however, IT/Telecom-related legal agreements account for 45 percent of the agreements in our databases".

Whilst IT agreements are complex by nature with issues like data ownership, intellectual property ownership, liability, and security issues, certainly compared to buying stationery for instance, it seemed surprising that the proportion was so out of line.

"This naturally raises the question, what are the best practices for managing the complex legal agreements related to IT products and services"?

Accenture suggest that organisations should look at this issue and "establish sensible policies to help triage legal requests and balance risk levels with the legal and other resources required to manage them". So you might exclude contracts of low value from full legal review or use short-from letter of agreement rather than a complex contract, for instance. But we would suggest you proceed with care - I have seen some low value IT contracts that were strategically critical for the buying organisation ("bottleneck" in Kraljic matrix terminology).

So clearly, organisations need to consider their own risk profile, but there needs to be a balance between protecting the organisation and spending a lot of time and money on contracts that are nugatory in value or low risk. And as Accenture points out, having cumbersome processes is just likely to push IT buyers or indeed budget holders into avoiding the formal processes altogether.

The second area covered is the use of start-up type IT firms as corporate suppliers. As the report says:

"CIOs and their teams are often at the bleeding edge of technology, being asked to deliver innovative new solutions and embrace new and emerging technologies. Sometimes, the sources of best innovation come from early stage tech start-ups"

There are advantages in this, Accenture point out. Buyers can influence the direction and products of the small firms, for instance. But there are downsides and risks - the start-up may become an ex start-up and go out of business very quickly! Staff turnover is another concern, or the business might get taken over (perhaps by a firm you don't really fancy doing business with).

So, "IT teams engaging with start-ups need to apply an extra layer of scrutiny with a focus on understanding financial stability (long-term goals and transition plans for data), insurance elements ... and personnel (turnover rates and stability of key personnel)".

Good point - and it is an interesting area that we should come back to at some point. Indeed, if anyone reading this has experience of working with start-ups as suppliers, would you like to write a guest post?

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