A Quick Guide on IT Procurement

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3
min read time
Calender
June 20, 2024
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As a business owner, you might have a solid understanding of IT procurement. This process helps you choose the best software for your business. However, the whole process is easier said than done.

The IT procurement process involves strategy, research, negotiation, and implementation to ensure operations run cost-effectively and efficiently. These factors will play a huge role in procuring the best technology solution for your business.

However, IT procurement can quickly become exhausting for your business, especially when your business grows. Given the sheer number of vendors and applications, managing the complex process without hassles can become overwhelming.

This is why it is essential to have a solid understanding of the process and a definitive IT procurement strategy to streamline it.

This article will examine IT procurement, its types, and the process for efficiently purchasing products within your organization.

What is IT Procurement

IT procurement is the process of acquiring software, applications, and related services essential for your organization’s operations and growth. Unlike traditional procurement, IT procurement is tailored to meet your technological needs.

IT procurement ensures that you have the right tools to enhance productivity and streamline workflows. However, keep in mind that you’re not blindly purchasing software.

Instead, you’re making strategic decisions to select the right vendors that align with your organization’s objectives.

This involves understanding your needs, evaluating various software options, and choosing vendors with the best value and support.

When you pay close attention to IT procurement, the selected software and applications will boost efficiency and support your business’s long-term goals.

Why Do You Need an Effective Process for IT Procurement?

An effective process for IT procurement is crucial to ensuring you get the right software. Without a structured approach, handling IT procurement manually can lead to numerous challenges that hinder your organization’s growth and operational efficiency.

For example, when you manage IT procurement manually, you often face a lack of coordination and consistency. This can result in decentralized purchases, where different departments buy software independently without considering the organization’s overall needs. Such purchases lead to several issues:

  • Redundant purchases
  • Incompatibility issues
  • Lack of negotiation power

But that’s not the end. Manual procurement processes are often slow. It involves multiple steps and approvals that can create significant bottlenecks and delays:

So, how can you ensure you don’t face such problems? By implementing an effective IT procurement process. It can streamline and centralize your software purchase, addressing the pain points associated with manual procurement.

Here’s why you need a robust process:

Centralized Purchases

When centralizing the procurement process, you ensure that all software aligns with your organization’s overall strategy and needs. This way, you can remove redundant purchases and ensure compatibility with existing systems.

Efficiency and Speed

An automated procurement process reduces the time spent on approvals and order placements. This helps you acquire the necessary software quickly, keeping projects on track and enhancing productivity.

Cost Savings

This is one of the best benefits of an effective IT procurement process. As you can negotiate better deals with vendors, you can consider bulk purchasing or long-term contracts to achieve cost savings.

Improved Vendor Management

A streamlined process helps you manage vendor relationships more effectively. It can ensure you stay on top of contract renewals, compliance requirements, and service agreements.

Reduced Errors

Automation reduces the risk of human errors. There is no need to worry about inaccurate order placements, which helps minimize the chances of operational disruptions.

Types of IT Procurement

Understanding the types ensures that each aspect of your IT infrastructure is effectively managed and aligned with your strategic goals.

Hardware Procurement

Hardware procurement involves acquiring the physical devices and equipment to support your IT infrastructure.

This includes computers and laptops essential for daily operations and employee productivity. It also involves servers that support network operations, data storage, and application hosting.

On the other hand, networking equipment like routers and switches boost communication and data transfer within your organization. Additionally, peripherals such as printers, scanners, and monitors support various business functions.

With effective hardware procurement, you can ensure your organization has reliable, high-performance equipment. This way, it can meet current demands and scale with future growth.

Software Procurement

Software procurement focuses on acquiring the applications and programs that drive your business processes. This type of IT procurement focuses on acquiring software licenses, applications, and operating systems.

It also involves productivity tools like office suites, project management software, and collaboration platforms that enhance employee efficiency and teamwork. Another important part of software procurement is specialized applications tailored to meet your business's unique needs.

This includes design software for creative teams or data analytics tools for business intelligence. Efficient software procurement ensures you have the right tools to support your operations.

Services Procurement

Services procurement involves contracting external vendors to provide IT services that support and enhance your technological infrastructure.

This includes managed services, where you outsource IT management and support to specialized providers who handle network monitoring, security, and maintenance.

Consulting services are also part of this, where you engage experts to advise on IT strategy, system integration, and digital transformation initiatives.

Support services arrange for ongoing technical support and maintenance to ensure your IT systems operate smoothly and efficiently.

Cloud Services and Subscriptions

Cloud services and subscriptions are more important than ever. This type of procurement involves renting servers and storage from cloud providers, known as IaaS. It also includes acquiring platforms to develop, run, and manage applications without PaaS.

Another key aspect is subscribing to cloud-based applications accessed via the internet. These include email services, CRM software, and collaboration tools, known as SaaS.

One of the best benefits of cloud services and subscriptions is their scalability, flexibility, and cost-efficiency. They can help you adapt to business needs and use advanced technologies without significant upfront investments.

The IT Procurement Process

As discussed earlier, IT procurement can help you acquire the most relevant and important apps and software for your business. However, that’s not all that you should remember.

It involves some key steps. Each step ensures you make informed and strategic decisions that align with your business goals.

1. Define Your Needs: Understanding the "Why" Before the "Buy"

Before focusing too much on the procurement process, you must clearly define your needs. You must understand why you purchase and how the new technology will support your business objectives.

We suggest you identify your business goals and challenges first. Determine what you aim to achieve with the new technology—increasing productivity, improving customer service, or gaining a competitive edge.

Moreover, contact different departments to gather insights into their specific needs and pain points. This way, the technology you invest in will directly contribute to your organization’s success.

Why Before You Buy

This is one of the most important points you need to know, so we decided to cover it separately.

Before you purchase any software or application, you need to know why you need it. Failure to consider this may trigger irrelevant purchases.

For example, you purchase software without determining the reasons first. After a few days, you realize that you didn’t need that software in the first place. While you may request a refund, most vendors won’t issue it if you don’t justify the cause.

This is why you need to understand your requirements first. Then, you can create a list and choose the most relevant software according to your needs.

2. Market Research and Vendor Selection

Once you have defined your needs, the next step in the IT procurement process is market research and vendor selection.

We recommend identifying reputable vendors who offer the technology solutions you need. Look for vendors with a solid track record of delivering high-quality products and services. Check customer reviews, industry ratings, and case studies to gauge their reliability and performance.

Image showing a vendor lifecycle

Additionally, contact your peers and industry networks as they can recommend potential vendors. It’s also important to assess the vendor’s long-term availability to ensure they can provide ongoing product support and updates.

But that’s not all. Once you identify the potential vendors, determine the features and functionality of their products. Make sure the solutions are perfect for your defined needs and business goals.

Remember that it’s extremely important to choose vendors who meet your current requirements and are flexible enough to adapt to future changes. The best way to achieve that is by conducting product demonstrations and trials to gain a hands-on understanding.

3. Evaluating Vendor Proposals: Beyond Just Price

This is another important IT procurement process you must know. When evaluating the vendor proposals, remember it’s more than just pricing consideration.

Besides pricing, the Total Cost of Ownership (TCO) is another key aspect you must pay close attention to. TCO includes the upfront purchase price and all associated costs over the product’s lifecycle. These costs often include:

  • Installation
  • Integration with the existing systems
  • Ongoing maintenance
  • Training
  • Support options
  • Upgrades

Once you’re done with TCO, your next focus should be security and compliance. Given the importance, the vendor must provide robust security features to protect your data from breaches and cyber threats.

Image showing risks associated with SaaS

Additionally, consider whether the solution meets your industry’s compliance requirements. This is especially critical in sectors like healthcare, finance, and others that handle sensitive information.

Lastly, you need to evaluate the pricing. Even though we mentioned pricing isn’t the sole deciding factor, don’t forget to consider the pricing benchmarks. This will help you ensure you’re getting a fair deal.

Moreover, considering pricing benchmarks will also ensure whether the pricing is competitive. Lastly, contact your industry peers to understand what they pay for comparable products and services. This can help you negotiate better terms with your chosen vendor.

4. Negotiating Win-Win Deals and Contract Management

During the negotiation, you must ensure the terms benefit both parties. This stage is crucial to ensure that you receive the best value while maintaining a positive relationship with your vendor.

Image showing a quote from Jinendra Jain

Remember that effective vendor negotiation involves clear communication and a strategic approach. Don’t forget to outline your key priorities and must-have conditions, such as budget constraints, delivery timelines, and essential features.

Be prepared to discuss these openly with the vendor, highlighting how meeting these requirements aligns with their interests.

Contrary to popular belief, negotiation is about getting the lowest price and ensuring that both parties feel satisfied. Be open to sensible compromises and firm on points critical to your organization’s success.

You also need to negotiate the SLAs, which are a critical contract component. Here are the essential things that an SLA should have,

  • Agreement Summary
  • Calculated figures
  • Roles and responsibilities
  • Scope and service quality
  • Uptime
  • Cancellation charges
  • Points of contact
  • Compensation for unmet goals
  • Performance metrics
  • Penalties

Tracking compliance with Service Level Agreements (SLAs) is also important. Regularly reviewing SLA compliance ensures vendors meet their contractual obligations. Here are the key clauses in a SaaS agreement you should remember:

  • Agreement scope
  • Service level agreements
  • Subscriptions and pricing plans
  • Liability
  • Data ownership and security
  • Termination and auto-renewal
  • Customer support and maintenance
  • Product modifications

Make sure that the SLAs include penalties or incentives related to performance. Penalties for not meeting SLA standards can motivate the vendor to maintain high service levels.

After you sign the contract, effective contract management will help you manage vendor relationships properly. Create a process for regularly monitoring and evaluating the vendor’s performance against the SLAs.

Do you want to know the ins and outs of SaaS vendor negotiations? Take a look at this podcast by Terry Larock, Procurement and Negotiation expert.

Moreover, document all interactions and changes to the contract to maintain a clear record. This documentation is crucial for resolving disputes and ensuring accountability. Regularly review the contract to align with your evolving business needs.

5. Renewing the Contracts on Time

Renewing contracts on time ensures continuity and avoids disruptions in your operations. However, managing these renewals can be challenging, given the complexities and risks associated with auto-renewals.

Here are a couple of problems you may face when auto-renewing contracts:

  • Auto-renewals can lead to contracts continuing under outdated terms
  • The lack of visibility can result in overpaying for services or being locked into unfavorable agreements
  • Automatic renewals often occur without a thorough review of the contract.
  • You will have less renegotiation opportunities
  • Contracts that renew automatically can result in unexpected financial obligations

So, now that you know the problems associated with contract auto-renewals, what should you do? To manage contract renewals effectively, you must consider an automated solution.

Automated contract management systems provide timely alerts and reminders before the renewal date. This way, you will have sufficient time to review and renegotiate terms. These systems can track all contract details, including renewal dates, terms, and conditions.

Image showing a quote from Dave Beckwith

Moreover, automated contract management can streamline the entire renewal process. It also reduces the administrative burden on your team, freeing up resources to focus on strategic initiatives.

6. Smooth Implementation: Setting Yourself Up for Success

Don’t assume that a successful IT procurement process ends with purchasing new apps. You also need to consider smooth implementation to understand the full benefits of your investment. And this is where user training comes into the picture.

User training is essential for the effective adoption of new technology. Employees may struggle to use the new systems without proper training, leading to decreased productivity and frustration.

When you create thorough training programs, it will benefit your employees. Conduct hands-on training sessions where users can practice using the technology in a controlled environment. Additionally, provide ongoing support through help desks, user manuals, and online resources.

Then comes change management, which is crucial for minimizing resistance and ensuring a smooth transition to new technology. Change can be disruptive, leading to various problems without proper management.

Creating channels for employees to share their concerns and provide feedback is important. You must also recognize and reward the employees who use the new technology and contribute to its successful implementation.

7. Performance and Vendor Relationship Management

Last, you must manage performance and maintain strong vendor relationships. This ensures your technology investments continue to deliver value and that your vendors remain reliable partners.

So, where should you start? We suggest tracking the KPIs to determine the effectiveness of the procured software. Reviewing the key metrics regularly can identify strengths and areas for improvement.

Remember that measuring the effectiveness of procurement performance is extremely important. With procurement KPIs, you can ensure your procurement team is performing well.

Procurement key performance indicators (KPIs) serve as checkpoints to assess and oversee your business's purchasing activities.

They offer precise metrics to determine performance, enhance purchasing processes, and ensure alignment with objectives for effective decision-making. Here are the procurement KPIs you need to measure:

  • Vendor compliance rate
  • Purchase order costs
  • Purchase order cycle time
  • Vendor availability
  • Price competitiveness
  • Subscription cost
  • License utilization rate
  • Procurement ROI
  • Emergency purchase ratio
  • User adoption rate

Also, your communication with the vendor has to be transparent. Regular meetings ensure they are fulfilling your expectations and performance standards. This will lead to quick issue resolution and collaborative problem-solving.

Make sure your vendors are aware of your future needs and potential innovations. This way, if they ever introduce a new product or service, you will be the first to take advantage of the benefits.

Key Considerations in IT Procurement

1. Total Cost of Ownership (TOC)

When evaluating IT procurement options, the Total Cost of Ownership (TCO) must be considered. This includes the initial purchase price and all associated costs over the entire lifecycle.

You need to pay close attention to all the components of TOC, including installation, integration, testing, and many more.

When you understand the financial impact completely, you can make more informed decisions that align with your budget and long-term objectives.

2. Vendor Reputation and Reliability

Vendor reputation and reliability are among the most important factors in IT procurement. Choosing a vendor with a solid track record ensures you receive high-quality products and support.

To determine the vendor’s performance and reliability, consider looking at customer reviews, industry ratings, and case studies.

Remember that choosing a reputable vendor ensures a smooth and ongoing partnership.

3. Compliance and Security Requirements

Compliance and security requirements are other important considerations in IT procurement.

To protect sensitive data and ensure legal compliance, it's essential to choose solutions that meet industry standards and regulatory requirements.

Don’t forget to evaluate vendors based on their security measures, data protection protocols, and adherence to relevant regulations.

Considering compliance and safety allows you to protect your business against potential risks and breaches.

4. Scalability and Future-Proofing

Scalability and future-proofing ensure your technology investments can grow and scale with your organization. Choose solutions that can easily scale to accommodate increasing workloads and user demands.

Consider the vendor's ability to adapt to emerging technologies and trends. This will boost the long-term value and flexibility of your IT investments.

How Can CloudEagle Streamline Your IT Procurement Process?

CloudEagle is a SaaS procurement and management platform that can help you streamline your IT procurement process.

But how? While there are various platforms in the market, what makes CloudEagle stand apart from the crowd?

Procurement workflows

CloudEagle has automated workflows to streamline procurement. Users can raise requests, and the workflows will automatically ensure the request reaches the right stakeholder. This expedites the process and provides complete transparency to the request.

Workflows for intake-to-procure

The team can see the progress in real time. Slack integrations are also available, and with the help of CloudEagle's Slackbot, your team can use Slack to raise purchase requests and approve them, making the process quicker and easier.

Image of CloudEagle's Slackbot

You can create private Slack channels to discuss the purchase requests and make the right procurement decisions.

Vendor research

CloudEagle can simplify the vendor research process. We will ensure you don’t waste time looking for the best vendors. With robust AI and machine learning capabilities, we will help you discover and choose the right software to optimize your SaaS spending.

Image showing a metric about software spending

The search process is also super simple. You don’t need to go through any technical hurdles. Just type your business's pain points, and our dashboard will shortlist the perfect SaaS vendors on your behalf.

Image of CloudEagle's SaaS map

We understand that discovering the right vendors takes time. Moreover, as new vendors are introduced daily, you might be confused about choosing the right one. We will ensure you don’t miss any opportunities to find new vendors.

Image of CloudEagle's vendor research module

But that’s not all. Do you remember we said contacting your peers to learn what software they use for their business is important?

While beneficial, talking to each peer about their software investment is extremely confusing and time-consuming.

To help you with the process, we will identify your peers' software. Our dashboard will let you connect with them to boost your software buying process.

Image of CloudEagle's price benchmark module

But what about vendor comparison? Clearly, it’s one of the most important factors when choosing the right vendors. No need to worry, as CloudEagle can also help you with that.

With side-by-side comparison, you won’t face any problems deciding which vendor can benefit your business the most. Our database uses AI to stay updated constantly. This way, you can compare the vendor prices accurately and pay only the right prices to them.

Image of CloudEagle's vendor comparison dashboard

Now that the vendor research process is complete, you may wonder if we provide vendor negotiation services. Yes, we do.

Our SaaS buying experts have years of industry experience. Not only are they skilled negotiators, but they also have access to the latest price benchmarking data. We provide accurate price benchmarking data from B2B transactions.

Image showing negotiation insights

In other words, we can help your business achieve maximized savings on SaaS negotiations. Our experts will consider numerous factors to create a robust vendor negotiation strategy, using the latest data to ensure maximum value for your money.

We also provide excellent spending visibility for your SaaS investment. Our integration library will help you look deeper within your SaaS stack. You will know which applications you’re using, how much you spend on them, and how you utilize them.

With 100% visibility, you can prevent rogue spending or share purchases. Thus, you don’t need to worry about overpaying for IT.

Let’s see what Eric Silver, AVP, Head of Procurement from RingCentral, says about CloudEagle’s capabilities in streamlining IT procurement processes.

Now that you know our features. Let’s see how we have helped Nowports save time and money on SaaS procurement. Before CloudEagle, they didn’t have benchmarking data for vendor negotiations during procurement and renewals.

Therefore, they failed to track their SaaS usage. This also led to missed renewal deadlines for Nowports.

With CloudEagle, they achieved complete visibility into their procurement process. Our workflows helped Nowports streamline it, allowing employees to track their requests in real-time with full transparency.

Conclusion

Effective IT procurement is crucial for modern business operations. It ensures you acquire the right technology to boost productivity and support long-term goals. You can avoid pitfalls like redundant purchases and inefficient vendor management with a structured approach.

Understanding various procurement types and following key steps—defining needs, market research, evaluating proposals, and managing contracts—saves costs and time.

But if you want to streamline your IT procurement process and optimize your SaaS spending, consider CloudEagle. Make sure you schedule a demo with us today!

Written by
Joel Platini
Content Writer and Marketer, CloudEagle
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