Will IT Sourcing Risks Get in the Way of IT Innovation?

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

Earlier this week, I read Dennis McCafferty’s article on IT Growth Outlooks and Trends in 2013. Nearly every trend he covered has a direct impact on sourcing, but four in particular stood out. As much as we hope these trends prove true, each exposes large knowledge gaps or risks in the way IT is purchased.

1. “The Distributed Economy: The ‘Everything as a Service’ shift will spark popularity for new technologies such as 3D printing for custom manufacturing.”

Fancy yourself an expert in outsourcing contracts? If the answer is anything but a certain “yes,” it’s time to acquire the expertise. Data ownership and migration, security, availability and vendor performance benchmarks are just a few areas in the IT service contract that can add unexpected costs. As the complexity of what’s being outsourced grows, the success of your project/initiative will become even more dependent on your ability to secure and enforce fair and competitive terms.

2. “Sitting at the Corporate Table: Once resigned to back-office tasks and supplying ‘tech stuff,’ IT will play an even bigger business-focused role for digital data, e-commerce, business automation, etc.”

One could argue that this isn’t a trend – it’s reality. For many businesses, IT enablement is as much of a competitive differentiator as, let’s say, price. What seems to be changing right now, however, is the growing role that IT sourcing and vendor management are playing in overall business success. Companies that invest in improving how well they purchase IT and manage vendors will see higher returns on their investments, lower costs and greater initiative success.

3. “Specialists Win:  Given how complex cloud computing, mobility and big data are becoming, vendors with unique expertise, as opposed to ‘be all/end alls,’ will gain competitive edge for your contracts.”

It’s true – specialized, smaller IT vendors have become an attractive alternative to the big players. However, there is a lot of risk involved in contracting with a new or specialized vendor. How will you validate competitive pricing and terms with a vendor with whom you have little experience? Are you sacrificing valuable discounts with your “be all/end all” vendor? Your vendor may have specialized experience, but do they necessarily understand your unique industry requirements?

4. “Buying Gets Easier:  As consumers are armed with more information about pricing, product specs and more, vendors will feel pressured to present ‘open book’ on tech products.”

I must respectfully disagree with Mr. McCafferty on this one. Vendors are under pressure to monetize the consumerization of IT, and it has driven many to make IT contracts, pricing and licensing more complicated. CIOs are voicing their frustration, but the response from vendors continues to be far from sympathetic. This may be the toughest year yet for IT purchasing as buyers try to navigate new device-based licensing models and indirect access restrictions, while also dealing with an onslaught of vendor audits.

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First Voice

  1. Vivek Dubey:

    One of the major challenges that most CIOs today are confronted with is as to how to balance the twin challenges of keeping IT costs lower and at the same time driving innovation. It is highly important to look beyond traditional outsourcing goals to ensure innovation remains intact for growth, as highlighted in this article.

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