Procurement strategy is important when ensuring suitable purchasing tools, hardware, software and services for your business strategy. There are a number of ways to make sure that IT procurement runs smoothly.
Good IT procurement practices and strategies make sure that companies can save money and prevent costly problems. Rather than considering IT procurement a cost center, where each penny saved makes a huge difference; well-functioning and efficient IT infrastructure often times pays for itself.
Choosing the wrong supply chain, missing warranty renewals, choosing cheaper but inferior options, and forgetting risk mitigation are all common mistakes that can cause significant issues. Downtime, compliance mishaps, and poor relationships with the supply chain can all be extremely costly. A Smart and strategic IT procurement strategy and practices allow companies to transition and keep their most valuable digital assets and most important infrastructure running smoothly.
In this article we address 7 ways to make sure that your IT procurement strategy works for you. These important recommendations aim to improve the effectiveness of the IT procurement strategy statement in place. Additionally, the article outlines risks to businesses if the procurement of technologies fails. As well as solutions and what a strategic procurement looks like to prevent these risks from being problematic, you will also get an idea of whether your current strategy needs a transformation to benefit your organisation.
Importance of SLA’s and warranties in your strategy
The first of our 7 ways to make sure that IT procurement strategy runs smoothly focuses on warranty renewals. Warranties are a powerful way for businesses to decrease risk when something goes wrong with IT infrastructure purchases. Vendors will usually provide warranties when purchasing hardware that’s new for a certain number of years. After that point, if a company doesn’t renew their warranty in time, the warranty will expire and the company will no longer be able to take advantage of the warranty services. These services may include free support or part replacement if failure occurs.
When purchasing hardware, software and services, Service level agreements (SLAs) commonly come alongside warranties provided directly from the manufacturer of an IT product. SLAs guarantee that the product will function at a certain level, usually measured in percent uptime. If the product or service doesn’t meet the requirements set out in the SLAs, the vendor will pay back or credit the company for the downtime. SLAs normally do not apply when a product is out of warranty. So keeping a warranty by renewing it in time is the only way to take advantage of a supplier’s service level guarantees and for your business transformation.
Warranty renewals can be expensive, but they are one of the best ways to ensure IT products continue to operate. Given that vendors know their own products better than anyone else does, purchasing genuine warranties and warranty renewals directly from the original vendor can often be a better choice than purchasing a cheaper service plan from another company. Even if the genuine warranty is more expensive, the original supplier is likely to be able to fix any issue that might come up much quicker. This means that less money is lost from downtime during peak hours.
How to select the correct vendors and suppliers for your IT procurement strategy?
Selecting the right vendors is critical to ensure that your IT procurement strategy runs smoothly. Companies should make sure to select vendors that have similar values. Value alignment with vendors reduces friction, improves vendor relationships, and allows them to save money in the end. Companies should make sure that their vendors prioritize the right requirements through their supply chain strategy and through the written contract. They should also ensure that the potential current and future supplier can meet business goals now and in the future by carrying out methods including supply chain consulting, supplier evaluation etc.
Selecting vendors for purchasing hardware, software and services with which a company can develop a good relationship is important. This goes beyond simply increasing the odds that a vendor will be willing to negotiate lower prices. Companies with good vendor relationships and collaboration might be the first to try out a new product from a vendor or take advantage of a good promotion which may promote business transformation. Even a vendor that offers a very good deal on a particular product may not be the right choice if a company determines that a long-term relationship with that vendor would be difficult.
Without using vendors with similar values to a company, the company will likely spend excessive amounts of money on purchasing hardware, software, services and increase their risk without benefiting in any way. Good vendor relationships help both the company and its vendors throughout the procurement process.
What is the importance of procurement management for IT procurement Strategies?
Effective IT procurement strategies can make sure that business objectives are delivered in a timely and cost savings manner with smart purchasing hardware, software and services decisions. By following a few transformation recommendations and strategies, businesses can make certain that their procurement processes are as efficient and reliable as possible.
Even before a company decides which supply chain to use for a particular product that they need, a well-designed process that can decrease sourcing cycle times and reduce costs.
Companies should consider the needs of all business units when deciding which goods and services need to be procured for your strategy. At this step in the procurement process, the organisation can avoid duplicate spending by communicating between business units with similar needs.
After determining which goods and services need to be purchased, companies should narrow down the list of the supplier market from the supplier evaluation following a standardised process. Be sure to check warranty options, customer service reviews, compliance requirements, and industry reputation for every potential supply chain.
Next, companies should follow a repeated, efficient process for negotiating a contract and making purchase orders to the selected vendors. With a process that is designed to be easily repeatable, companies can make sure that their procurement process runs like a well-oiled machine for their business transformation.
How does an automated procurement system benefit your IT procurement strategy and process?
Procurement automation software can make a huge difference in the efficiency, transparency, and control of the procurement process. Companies using or thinking about purchasing software for procurement automation can be sure to never mistime payments or fail to meet the requirements for a promotion. They also give companies much more oversight into how money is spent. Thus allowing redundant purchases to be kept to a minimum. In some cases, with procurement automation software, companies can even set up online vendor portals to allow their suppliers to sign in and supply updated information when necessary to reduce supply chain disruptions. Therefore improving communication between suppliers and customers.
Throughout the entire process, automation software can help, especially if a large number of vendors are present. Procurement automation software takes much of the busywork out of the procurement process. This allows procurement teams to spend less time on the process and more time getting the products they need to fulfill business requirements.
What is customer service and support?
With IT services, even a few minutes of downtime during peak business hours can be extremely costly. If service providers and suppliers of important hardware are chosen without enough concern for uptime and monitoring, companies might unexpectedly have periods of downtime, even during times when they absolutely need services to be functional.
Proactive service can significantly reduce downtime. Instead of waiting for something to go wrong, a supplier that offers proactive service will continually keep IT infrastructure running in peak operating condition. Therefore, decreasing the odds that any amount of downtime will occur.
However, even with very good proactive service, downtime and other issues will occur. When this happens, it is important to have selected vendors and providers that can offer fast and reliable service. When it comes to critical services that businesses rely on, efficient and reliable service should always be available.
What is the value of supplier quality in procurement?
When choosing between two similar products from two different suppliers, price might be the primary metric used at many organizations. Although price should always be an important consideration when purchasing hardware, software and services, it’s important to remember a few points.
First, even a product sold at a very good price is useless if it does not meet business requirements. Cost-effectiveness should be prioritized, but not so much that business needs are ignored in favor of saving money. Similarly, organizations should not purchase products or services that exceed business requirements by an excessive amount. Some amount of future-proofing may be a good idea. For instance, purchasing a product with more capacity than needed so that it will last longer. However, businesses may occasionally overestimate their requirements and spend more than they need to. In short, it’s important to select a product that meets business needs at a reasonable price without selecting a cheap product or supplier that does not meet business needs.
Second, spending the time to negotiate with important suppliers pays off in the long run. If a company uses procurement process automation software, they may be able to get a discount from suppliers by committing to pay early on repeat orders. When negotiating, it’s important to keep in mind that any deal should benefit both the supplier and the customer. By offering something (like faster payments) in exchange for lower prices, businesses can maintain good relationships with vendors while saving money. Not negotiating is a lost opportunity, so it’s a good idea to always consider negotiating with any long-term supplier.
What are the risks involved in strategic procurement? How to mitigate risks from your procurement strategies?
Regardless of the industry which a company is in, decreasing risk is important. From data breaches to natural disasters to legal nightmares after failed compliance checks, all sorts of problems can destroy businesses that do not consider risk up front while making purchasing decisions. Do you have a disaster recovery plan for business continuity?
For companies in the healthcare industry, legal industry, or other areas with strict compliance regulations, integrating risk management into every step of the procurement process is especially important in ensuring your IT procurement strategy runs smoothly. Companies should only consider vendors that can meet regulatory requirements applicable to the industry that the company works in.
Why is customer experience so important?
In companies that use technology throughout their business, issues in customer-facing IT systems can be disastrous. As many of the technologies, products, and services used by modern companies are purchased or licensed from suppliers, IT procurement has a direct and high-impact connection with business performance. Whilst minimising costs related to purchases made from IT suppliers to the greatest extent possible should occur, some cost-cutting measures can create a significant issue for the customers of a business.
Choosing inexpensive server hosting over well-supported offerings, for example, can increase the odds that some kind of downtime or slowness would occur. If these systems are particularly important to day-to-day operations that impact customers, issues with IT suppliers can create unhappy customers and result in lost revenue.
Retaining customers and providing high-quality service is important for every kind of business. Since IT procurement strategy is such a critical part of nearly all modern businesses. Whether or not IT is the focus of the company’s operations, poor choices made at the procurement stage can create rippling effects throughout the business. On the other hand, making good procurement choices can help a business run smoothly in other areas as well. Not to mention saving time and money in the long run.
Conclusion
IT procurement strategy is no longer simply a tactical aspect of running a business. Since the success of IT procurement directly affects nearly every part of modern companies. Choices made throughout the procurement process and efficiencies introduced into the process itself can pay significant dividends for companies. Poor choices like misguided cost-cutting measures and inefficient processes can lead to unexpected and highly damaging downtime. It can also lead to data loss, security breaches, and other serious issues.
As the article outlines, there are a number of ways to make sure that your IT procurement strategy runs smoothly. By making the right choices now, IT procurement divisions can significantly improve many different aspects contribute to overall company success.
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