How the Cloud Shift Can Drive IT Procurement Strategy
There’s an incredible shift happening in the world of technology. It’s not just that new technologies and SaaS products are being introduced to the market more rapidly than ever before, but organizations are purchasing these tools and implementing them at a faster pace due to the value they see in each new application. Take for instance this staggering statistic from Gartner: “Cloud application services (SaaS) is forecast to grow 20.3 percent in 2016, to $37.7 billion. As software vendors shift their business models from on-premises licensed software to public cloud-based offerings, this trend will continue.”
IT Procurement’s Shifting Role
In the face of the changes and growth of enterprise technology stacks, procurement executives have the opportunity to lead the organization by embracing the shift to the cloud. IT procurement is the only department that has visibility into 100 percent of cloud expenses, utilization and sentiment. With this knowledge, IT procurement can now lead strategic conversations across the entire organization to identify opportunities that drive greater business value.
IT procurement is no longer a functional job whose role entails sending out lengthy RFPs and reviewing the responses before making a purchasing decision. That process often requires weeks or months of evaluation before recommendations are presented to the executive team or other stakeholders. Today, the role of IT procurement has changed, largely due to the introduction of SaaS and other cloud- based delivery models that have changed the way organizations select and deploy technology.
To keep up with business demands and to execute a competitive enterprise digital strategy, organizations have to leverage the speed and flexibility of the cloud to their advantage. SaaS-friendly organizations are expanding their SaaS usage — 90 percent of SaaS adopter respondents to Gartner’s 2014 cloud adoption survey stated that, by 2018, they expect SaaS (delivered from a public cloud) to constitute more than 50 percent of their spending on enterprise applications (Gartner). It is clear that procurement has outgrown its old functional and process-driven job roots and can be a strategic function that enables the executive team to communicate a broader story around embracing digital innovation and fueling growth throughout the enterprise.
While IT departments typically get involved with a subset of projects, such as large integrations or enterprise-wide software purchases, IT procurement is increasingly becoming the only function that can connect the dots on all software across an organization. The result? IT procurement teams are the glue that holds the cloud ecosystem together. IT procurement leaders are becoming trusted advisors and leaders in organizations and are therefore, as indicated above, becoming more involved in laying future groundwork and strategy for their organizations to lead the charge with the cloud shift.
Current Challenges for IT Procurement
Decentralized SaaS spending is happening throughout organizations all the time, which leads to unsanctioned purchases, possible security concerns and unchecked auto-renewals.This lack of visibility into departmental buying, while perfectly healthy for organizations and often referred to as “Shadow IT”, can create a disparate cost view at the top level. Add on the challenge of tracking employee software subscriptions when individuals or teams use their company or personal credit card for the sake of simplicity and avoiding red tape and those “small” annual subscriptions add up quickly—especially when multiple employees or teams across the organization may be charging their credit cards for the same subscription.
Because many buying decisions have shifted to each line of business, executives must also consider the possibility of redundant subscriptions across the organization and missed opportunities for pricing discounts. It can be costly and time consuming to track down whether multiple individuals or teams are using the same applications if they are simply charging the fees to their company or personal credit card.
When it is time for subscription renewals, organizations lack a clear understanding of their software utilization and whether or not they need to increase or decrease the number of licenses or overall solution with each vendor. Going into renewal conversations, it is also imperative for the IT procurement team to understand who is using each application and if they are satisfied with the value they are receiving from it to provide the best technology for the enterprise at the best cost possible.
Current Opportunities for IT Procurement
While there are still challenges that IT procurement leaders must solve for, there are incredible opportunities that can help the function become strategic. With the help of Cloud optimization software, it’s possible to capture what’s being purchased across the entire enterprise. For example, IT procurement teams can gain visibility to determine if subscription redundancies are occurring in the organization. They can also view data on purchases made by each department, and even by individuals that use their company or personal credit cards to purchase subscription software. With new visibility into critical data, IT procurement can work out enterprise or group discounts, or better yet, roll all of those subscriptions into a single master agreement.
With real-time data to track and monitor SaaS subscriptions across the organization, IT procurement can be confident no dollars are left on the table.
By creating visibility, IT procurement leaders can build processes at each level to assist departmental leaders and put processes in place so that even employees can purchase software without red tape. With a solid foundation, IT procurement leaders move from being tactical software purchasers to strategic advisors in the software purchasing cycle. Thanks to the cloud shift, IT procurement has the opportunity to initiate the conversation and inform departments and business units about innovation happening across the enterprise—something that simply couldn’t be achieved without a single source to manage cloud subscriptions.
IT procurement leaders need a way to manage software across the organization while gaining complete visibility into each application’s cost, utilization and sentiment for enterprise-wide optimization.
Quite simply, the end goal of IT procurement is to understand all of IT, including SaaS, cloud-based software, and subscription software. Visibility and cost optimization are top of mind for IT procurement leaders, and today, for the first time ever, it’s possible for IT procurement to obtain 100 percent of licensing data and have visibility in order to put a strategy around it.
About the Author
Eric Christopher is co-founder and CEO of Zylo, the leading SaaS optimization platform that transforms how companies manage and optimize the vast and accelerating number of cloud-based applications organizations rely on today. Eric launched the company in 2016 with 16 years of sales and management experience in the SaaS space, including his recent position as SVP of Sales at Sprout Social in Chicago.