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Follow on Google News | NPI Says IT Sourcing Practices Will Undergo Rapid Change in 2013Research exposes the growing trend driving new IT sourcing risks.
By: NPI Financial Contract complexity now outranks pricing as a sourcing challenge. The complexity of vendors’ licensing programs has eclipsed pricing disparity as one of the top reasons for IT overspending. More frequent changes to vendors’ licensing and pricing programs, the inclusion of dynamic contract language, and vendors’ ability to creatively scope down licensing rights have driven many companies to overbuy and pay above fair market value for technology solutions and services. Sourcing validation requirements are increasing. Financial regulations and compliance mandates continue to impact enterprise sourcing behavior. Businesses are under pressure to prove fiscal responsibility, and provide visibility into supplier contracts in order to make verifiable determinations about future financial commitments. The result has been a need for greater risk controls in the IT vendor contracting process. More companies are seeking ways to avoid the use of nonstandard contract terms, confirm the financial viability of business-critical suppliers, ensure specific service levels, and assure contract pricing is aligned with fair market value rates. To do this, best-in-class IT sourcing groups are turning to third-party sourcing experts for validation in these areas. The decentralization of vendor management is harming IT effectiveness. For the last decade, enterprises have paid the price for a decentralized approach to IT sourcing and vendor management. Rogue departmental spending, loss of negotiation leverage, and the failure to systematically improve vendor performance has eroded IT effectiveness and cost management. To re-centralize IT spending and sourcing, as well as improve the success of strategic IT initiatives, many companies are creating vendor management offices (VMOs) – an overarching organizational concept for strategically managing sourcing and suppliers to drive value and mitigate risk. Organizations establish VMOs in acknowledgement that external IT supplier spend is large and business-critical, and suppliers are a critical extension of IT service delivery. M&A transactions are demanding faster, smarter IT rationalization. After an unimpressive year in 2012, the M&A environment is slowly improving. The impact of a stronger deal environment on IT is significant, especially as the value of today’s companies is increasingly tied to their IT capabilities. Companies in the midst of a merger, acquisition or divestiture must be able to evaluate the implications of a transaction on their IT contracts quickly and effectively (then negotiate accordingly) “The IT purchase is becoming less transparent and more complex by the day. Sourcing validation and sourcing bandwidth augmentation have become very effective ways to mitigate the risks that this environment presents,” said Jon Winsett, CEO of NPI. For more information on NPI’s <a href="http://www.npifinancial.com/ About NPI NPI is a spend management consulting firm that protects companies from overspending in specific cost categories – information technology, telecommunication and transportation. Using a combination of market experts, proprietary methodologies and extensive data, NPI ensures that prices and terms are best-in-class.. Reviewing more than 14,000 purchases annually, NPI provides objective oversight for billions of dollars of strategic spend for its clients. To learn more about how <a href="http://www.npifinancial.com/ Media Contact Hannah Bower Bower Communications 404.247.1123 Hannah@bower- End
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