Organizations need to constantly upgrade their technological investments to stay competitive, enhance operational efficiency, and achieve cost savings. Nevertheless, procuring new IT devices can be time-consuming especially when there is no process in place. An effective IT asset procurement process can cut costs, reduce risks, and make the procurement process quicker and more streamlined.
What is IT procurement?
IT procurement is one of the core steps in the IT asset management process that involves assessing, negotiating, and procuring IT assets. IT procurement examples can be broadly divided into:
- Direct procurement: These are assets that directly impact IT infrastructure, such as hardware assets or necessary software licenses.
- Indirect procurement: These assets help in managing and maintaining smooth operations like consumable supplies, or cloud-based software solutions.
- Services procurement: These include services provided by independent vendors such as Software-as-a-service (SaaS).
These are strategic investments, consisting of substantial expenses that impact the bottom line of the organization. Hence, the purchasing process needs to be research-intensive and cost-efficient.
In today’s competitive environment, IT procurement managers aim to purchase value-for-price IT assets that streamline business processes and provide greater value to users, and the organisation. A recent Deloitte survey of Chief Procurement Officers (CPO) in 36 countries says:
The five-step IT asset procurement process
A dedicated IT asset procurement process forms the basis of a successful asset lifecycle management and requires meticulous planning and strategizing.
One of the most common procurement challenges is that most software products are cloud-based and sold on a subscription basis. Lack of an IT asset procurement process allows users or departments to sign up for a software plan and charge their corporate cards. The IT department not being aware of all the softwares used in the company can lead to high security risks, increase in shadow IT, and less control over security data protocols.
Many departments use multiple software tool subscriptions that provide identical services, increasing total software spending costs. There are various vendor contracts for IT admins to manage rather than focus on negotiating better prices with one vendor.
Following IT asset procurement steps can help resolve these issues and ensure the organization purchases high-quality assets. Here are the steps to achieve this:
1. Evaluate organization needs
All departments within an organization use IT assets as per their needs. Identifying their asset requirements is essential to understand the current technological landscape and discuss ideal tools that need to be procured.
IT procurement managers can begin by discussing IT needs with relevant departments. Let’s say, the organization is planning to switch to a new collaboration software. They can meet department leaders and inquire about usage, non-negotiable features, integrations required with existing products, and other unique requirements.
Having detailed answers to these questions will refine their search and help find the right tool that meets organizational needs at its best.
2. Inspect and review current inventory
This step includes a thorough review of inventory to assess current IT infrastructure and determine how these assets can be used effectively.
Start with gathering information on all the devices and softwares used in the organization, whether company owned or bring-your-own devices (BYOD). Then, categorize and maintain this inventory to track and stay updated on asset ownership, status, and usage.
Having complete visibility into IT inventory can help identify potential areas for improvements and reallocation. For example, users in the sales department have requested to use collaboration software. IT admins can perform a health check on the current number of license seats unused for this application. They can find accurate information on the number of seats available and reallocate to users in the sales department. As a result, they can easily avoid unnecessary purchases and efficiently use existing inventory.
3. Market research and shortlisting vendors
Assuming license seats are all used, the next step is to procure new seats for collaboration software.
This requires running a market survey for potential vendors providing this type of software. Vendor research can be narrowed down with the information gathered in the needs identification step. It can help shortlist vendors offering solutions tailored to your specific needs.
Evaluate list of vendors based on experience, reputation, pricing and feature capabilities. Check online reviews or read through industry reports to know their financial stability and security practices.
It is also essential to assess how a vendor’s solution fits into the existing infrastructure. Software that supports each organization’s unique business strategy and is appropriate for the industry they operate in is necessary. For example, a hospital searching for an Electronic Health Record (EHR) system can search the market for EHR solutions and assess how well the solution satisfies healthcare requirements.
A final list of vendors is prepared once the evaluation process is complete. Some are removed based on budget constraints and others may not offer non-negotiable features. Prioritize vendors based on organization’s procurement policies and practices and proceed with ones that checks all the boxes.
4. Negotiate vendor contracts
Once a vendor is selected, IT procurement managers move forward with software contract negotiation. They can discuss pricing, service level agreements (SLAs), software uptime requirements or any customization or integrations required during implementation.
These negotiations require careful consideration and open communication to build mutually beneficial relationships. A vendor that provides high quality services at reasonable costs as well as long term customer support throughout the lifecycle of the contract can help deliver long term value to the organization.
5. Procurement approval
Software purchasing process also defines a set of approvers for each step. Multiple users at different levels of authority can review, approve or deny requests based on defined criteria such as budget, vendor, or location details.
At the needs identification step above, leaders from different departments can approve for initial software purchasing requests. They can review application details, features and other requirements that align with their tech needs.
For shortlisting vendors, the Chief procurement officer (CPO) needs to approve the selected vendor. They can assess security risks associated with each vendor and approve the one that aligns with the security stance of the organization. They also review the vendor’s evaluation process to ensure the selected vendor adheres with organization policies.
A dedicated approval workflow can streamline the procurement process. Using robust software can allow procurement teams to set approvers who can define criteria for approval. For our collaboration software purchase request, the CPO can deny the vendor on the system based on various different factors. This will notify the team of the request denied and they can recommend other shortlisted vendors in the same approval request. If all criterias are met, then the request is approved, saving time and effort from creating multiple requests.
Best practices for IT procurement
The right IT procurement strategy is essential to enhance operational efficiency. Following best practices alongside can further elevate this process. Here are a few practices that can be followed:
- Ensure IT assets acquired align with organizational needs. They should be strategically procured so that they support business goals – compatible with larger processes and workflows and allow smooth integration capabilities.
- Involving all relevant stakeholders is important to review information as much as possible before making the final purchase decision. Understand how acquisitions will impact operations and streamline workflows for different departments.
- Conduct complete risk analysis to protect the organization from potential financial or compliance issues. The analysis can assess the probability of financial loss from IT procurement and plan to mitigate those risks, if any.
- Strategically set your budget that focuses on total cost of ownership rather than short term goal of reducing acquisition costs. Make the best procurement decisions by figuring out how new assets will save time for other important tasks and how much it will cost to operate and dispose of.
Frequently asked questions
What is IT sourcing?
It is a process to procure IT assets from outside sources – third party vendors that can be onshore, nearshore or offshore.
What are major KPIs for IT procurement?
Some important metrics for IT procurement include cost savings, procurement cycle time or contract compliance.
Who are the major stakeholders involved in the procurement process?
Major stakeholders include IT professionals, IT procurement managers, users from different departments and vendors.
