Transactional vs. Strategic IT Procurement:
What’s the Difference?
In the rapidly evolving landscape of Information Technology (IT), organizations are often faced with the challenging task of acquiring the right services and solutions to meet their technological needs.
The methods employed to acquire these resources are crucial in determining the success of an organization in achieving its IT objectives.
While both transactional and strategic procurement methodologies fall under "procurement", they represent two distinct approaches that can significantly impact an organization's IT capabilities and overall performance.
IT Procurement Has Shifted to "Strategic" in Nature
Due to the complexities and nuance of many IT services and solutions, instead of focusing solely on cost reduction, IT procurement now prioritizes value creation, long-term partnerships, and innovation. This approach, often referred to as "Strategic IT Sourcing", is anchored in aligning IT sourcing decisions with the organization's overarching business objectives. It is a dynamic, ongoing process that involves continuous evaluation of vendor relationships, market trends, and emerging technologies to ensure that an organization's IT solutions are not just up-to-date but also future-ready.
IT Procurement: A Transactional Approach
While there still is a place for transactional IT procurement in heavily commoditized areas, such as broadband circuits and PSTN access, these areas also present significant opportunity when viewed holistically and aligned with the business strategic objectives.
This approach typically emphasizes immediate cost savings, swift vendor selection, and speedy service delivery. It's akin to a one-time transaction where organizations seek to secure IT goods and services at the lowest possible cost. While cost efficiency is a critical aspect, it can lack a forward-looking strategy. It might lead to short-term gains, but it can hinder the organization's ability to adapt to future technological shifts and opportunities.
Resourcive has witnessed a significant shift in recent years, where areas that were once deemed transactional and lacking strategic value have now become integral parts of a comprehensive IT strategy roadmap. This transformation necessitates an increased focus and expertise in these areas.
Some of the primary areas that we see this are:
1) Network aggregation. For many years, multi-location businesses would achieve easy cost savings by using an aggregator to keep their existing services in place, and consolidate their billing and support.
2) Voice/UCaaS licences. Unified Communications as a Service ("UCaaS") has quickly commoditized itself over the past few years as providers race to capture market share and position their higher margin products for account expansion. This has created opportunities for companies to quickly reduce their per user license cost leveraging Enterprise Agreements for GPO pricing plans.
3) Corporate Mobility. Another area where GPO purchasing plans have historically reigned supreme. Companies have benefited from Verizon, AT&T and T-Mobile competing aggressively on price and their serviceable areas to capture market share. Again, while per line costs have come down and singularly achieved cost compression success, we have seen significant opportunities to source mobility solutions impact the organization far beyond price.
Strategic IT Sourcing: A More Holistic Approach
If we look at these same three examples, it becomes clear how a more holistic approach can identify and create additional opportunities for value creation:
1) Network aggregation. Large Wide Area Networks can and should benefit from a more in depth approach to solutioning for future growth needs, right-sizing bandwidth and redundancy requirements and oftentimes layering on a level of value-add support previously lacking. New technologies such as 5G and satellite provide additional backup options, while effective contract negotiations and purchasing methodologies can heavily impact long-term value.
2) Voice/UCaaS licenses. Voice and communications type of purchasing decisions should be considered holistically with other areas of IT procurement (i.e. is the current network infrastructure able to handle VoIP). Furthermore, per user licensing costs become less irrelevant if you are providing PSTN access to users who do not have an actual need for that type of license. Full visibility into your environment is key to having complete understanding of the true needs and requirements of your users and business.
3) Corporate Mobility. When evaluating the extensive deployment and management of numerous devices within an organization, there is immense potential to uncover opportunities by carefully assessing and quantifying the expenses linked to internal IT device management. Additional areas of opportunity include: suboptimal data plans and usage, device staging and kitting, online portal administration, and other related factors.
All of the Above (Security)! Additional procurement considerations should be made for IT's ability to secure and manage these applications, devices, and users.
Benefits of Strategic IT Sourcing
Let's delve into some of the benefits of strategic IT sourcing for mid-market and enterprise organizations:
1. Sustainable Competitive Advantage: In a rapidly changing technological landscape, having a sustainable competitive advantage is crucial. Organizations that embrace strategic IT sourcing are better equipped to respond to disruptions, harness innovation, and gain an edge over competitors.
2. Future-Proofing: Technology evolves at an unprecedented pace. Strategic IT sourcing ensures your organization remains adaptable to emerging trends and can smoothly transition to new solutions, preventing you from being trapped in outdated technologies.
3. Value over Cost: While cost-saving is essential, it shouldn't come at the expense of value. Strategic IT sourcing prioritizes value creation, allowing you to make informed decisions that lead to greater operational efficiency and customer satisfaction.
4. Innovation Catalyst: Strategic IT sourcing fosters partnerships with vendors that align with your business’ goals. This collaboration can lead to groundbreaking solutions that elevate your organization's offerings and customer experiences.
5. Risk & Disruption Mitigation: A strategic approach involves thorough risk assessment and management. It considers the second and third order effects of buying decisions, beyond cost. By proactively addressing potential risks, you safeguard your organization from unforeseen disruptions that could arise from hasty procurement decisions.
Unlocking the Power of Strategic IT Sourcing with Resourcive
For most organizations, it is unrealistic to staff a team of subject matter experts across all IT services and solutions for their internal buying requirements. This is where Resourcive, a leading strategic IT sourcing consultancy, enters the picture. With deep expertise and an innovative approach, Resourcive empowers organizations to navigate the complex landscape of IT sourcing with confidence.
How Resourcive Can Make a Difference:
1. Customized Solutions: Resourcive understands that each organization's needs are unique. They work closely with clients to craft tailor-made sourcing strategies that align with their business objectives.
2. Informed Decision-Making: With access to the latest market insights and trends, Resourcive equips you with the knowledge needed to make informed decisions that drive your organization forward.
3. Vendor Relationships: Building strong, mutually beneficial vendor relationships is at the core of strategic IT sourcing. Resourcive helps you establish and nurture these relationships for long-term success.
4. Future-Focused: Resourcive doesn't just solve today's problems; they position your organization for tomorrow's opportunities. Their forward-looking approach ensures you're always ahead of the curve.
5. Risk Management: Resourcive's experienced consultants identify and mitigate potential risks, ensuring your IT sourcing strategy is robust and resilient.
The time is now to embrace the future of IT procurement with Resourcive, and elevate your organization to new heights of innovation, value creation, and success.