Will the IT Spending Environment Be Different in 2012?

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.

In Jim Collins' recent book, "Great by Choice: Uncertainty, Chaos and Luck -- Why Some Thrive Despite Them All," he explores how some companies are able to rise to greatness amidst market upheavals. He also shares that uncertainty is here to stay -- a truth that must dictate the way businesses operate moving forward (see excerpt here).

This is especially true for IT. Economic uncertainty has become a way of life, and while some technology budgets may be increasing, very few are increasing in step with the demand on IT to deploy new initiatives. For many IT departments, the last 12 months have been spent treading water and planning for (rather than executing on) much-needed IT innovation. But, don't expect more of the same next year. These initiatives will need to be in high gear to keep businesses competitive and productive. For that reason, 2012 may be the biggest challenge yet.

Here are three questions IT sourcing should be answering in preparation for the year ahead:

  • How can I free up cash? If your business is like most, IT operations are already running "lean and mean." To find the budget to fund new IT initiatives that will drive business, you need to focus on external vendor spend. It's not what and how much you're buying, as it is how you're buying and whether or not you're paying fair market value for those purchases. For most companies, the latter two areas are the only stone left unturned -- and, yet they often yield the biggest savings. These savings can be used to make your budget go farther.
  • Do I understand how new and forthcoming licensing and pricing changes will impact IT spending? Big vendors like Microsoft, VMware, Verizon and Cisco are making significant changes to the way they price, package and structure their offerings. It's imperative that you understand how these types of changes will impact your spending in the coming year. If you're not sure, bring in outside expertise. Not knowing is not an option -- unless you're a fan of unanticipated overspending.
  • Have I optimized IT contracts to support my 12-18 month goals? So, you've freed up the funds to jumpstart a new IT initiative (see question 1 above). Now it's time to make sure all vendor contracts relevant to that initiative have been optimized. Will your new initiative require more network capacity, security or new software licenses? Reviewing your contracts now will allow you to adjust terms so you can avoid overages, consolidate infrastructure and leverage available discounts.

-- Jeff Muscarella, EVP of IT, NPI

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