IT Procurement

What You Need to Know About IT Software Procurement

Athena Commercial
June 15, 2021

For those of you scratching your heads, IT Software Procurement is simply the process of acquiring new software technology for your business. Sounds simple enough, but why is it a big deal?

Software and business operations have become inseparable in the digital era, with sophisticated and well-integrated software able to set your business apart from competitors. With IT software playing such a pivotal role in business efficiency, it is imperative that organisations look at software acquisition in a strategic way from the outset.

Our guide on What You Need to Know About IT Software Procurement will give you the lowdown on what you need to consider when purchasing IT software, including where to source suppliers, the importance of detailed contracts and how to ensure the ongoing smooth-running of your software products.

Looking for our guide on IT hardware procurement? Click here.

Three Key Considerations

Before embarking on your software acquisition journey, there are three key considerations that you will want to bear in mind throughout the process:

1.     Costs: as with any supply acquisition, finances play an important aspect in technology procurement, impacting the company’s profitability. However, unlike tangible supplies, software often incurs ongoing fees – such as licenses, maintenance and upgrades and these are all things to be mindful about when approaching suppliers. With this in mind, it is always worth evaluating the long-term costs offered by distributors or value-added resellers (VARs) vs purchasing direct from the manufacturer as suppliers within the channel often offer better pricing.

2.     Compatibility: software is supposed to support and improve organisational activities and as such its essential that any new acquisitions are compatible with the existing infrastructure that your business is using. For companies exhibiting ongoing growth it may be worth considering the long-term benefits of migrating to a cloud-based infrastructure to facilitate scaling up.

3.     Flexibility: technology is advancing at a rapid pace and new products are constantly being released into the market, rendering outdated products obsolete. When making IT software purchases, make sure to weigh up the cost-benefits of purchasing longer-term licenses vs the advantages of having shorter license periods that allow your business the flexibility to move to a new product when needed. It’s also important to look out for products with more advanced features and capabilities so that the software can grow with your business – rather than being outgrown.

The Importance of Supplier Diversity

In today’s age, business success largely equates to speed and adaptability to change – and this is particularly important when it comes to an organisation’s technology infrastructure. Once, procurement strategies might have advocated the use of a smaller base of suppliers to ensure stronger inter-party relationships and to acquire greater savings from a single supplier. However, now, a successful procurement strategy necessitates supplier diversity, allowing businesses more expendability over their suppliers to match the rapid evolution of new technology. A Deloitte survey (Global CPO Survey 2019) revealed that 67% of top CPOs have already implemented supplier diversification strategies into their IT procurement systems.

What’s the Process of Procuring IT Software?

IT software procurement typically follows other supply procurement procedures and can be broken down in three stages: analysis & identifying needs, tender acquisition and contract executions. See below for further details on each stage.

Analysis & Identifying Needs: In the first stage of software procurement, companies must identify their requirements through an analysis of business activities and the technology solutions available to supersede existing activities. This may include a cost-benefit analysis and the consideration of any technology that competitors have successfully implemented.

Tender Acquisition: Once software needs are identified, sourcing options must be considered. Tenders are requested from suitable vendors, which will then be evaluated to assess merits. Following this, you will likely enter into negotiation with the selected supplier to ensure that the contract suits your organisational needs and to secure any ongoing maintenance support for your software.

Contract Execution: The final stage involves the ongoing management of contract execution, ensuring that the supplier makes good on their proposal and delivers the software along with any agreed implementation, further product support or warranty.

 

Do You Need an IT Procurement Specialist?

Whilst software purchasing might seem relatively straight forward, there are some unique challenges involved with software procurement that may necessitate the use of an IT procurement specialist to navigate you through:

Ongoing / Lifecycle Costs

As mentioned, costs associated with IT software rarely end at implementation. In fact, typically the ongoing costs of software maintenance and upgrades overshadow the initial acquisition costs. Further to this companies can also incur fines via audit from larger companies such as Oracle, SAP and Microsoft. A software expert will be able to advise your team on the hidden costs associated with different software solutions along with the likelihood that your business will need to upgrade to a different version of the software in future. They may also be able to shed light on the different warranties that software providers offer. These are all things that should be considered during the procurement phase – rather than just the initial acquisition cost presented by each software supplier.

Needs vs Advanced Capabilities

The obvious advantages of technology can make it tempting for businesses to seek IT beyond the needs of the company. This can further be compounded when dealing with suppliers, who will often try to sell the most advanced software packages to customers. An IT specialist will be able to undertake an assessment of your existing business functions and identify which technological capabilities are needed to improve these functions. Allowing them to deal with suppliers on your behalf or advise you during the procurement process will ensure that your IT software acquisition is based on needs.

Integration

Whilst you may know which existing IT products and systems that your business uses, an IT procurement specialist will be best placed to advise you on which particular software(s) can most easily be integrated with your existing systems. Further to this, they may be able to offer additional insights into where two needs may be catered for by a single software – rather than two separate acquisitions.

Where we can help you

We can help your business understand what your true requirements are before you make any decisions. Our expertise allows us to assist you when it comes to utilising proper procurement practises that will pay dividend. We can guide you in reviewing your existing technology contracts and what to look for in new ones, so you avoid any automatic price increases, capacity limits, cancellation restrictions and beyond.

Choosing the best vendor for your business can be an overwhelming process. We can help with market research and negotiating price to get you the best deal because we have an extensive knowledge of the market. Once you have decided on your IT requirements and defined the products needed, we can assist with researching appropriate suppliers, contacting them for formal proposals, negotiating your terms and ensuring that penalties are in place if a supplier doesn’t perform.

For further advice or an initial consultation please get in touch at info@myarrowhead.io.

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