Gaining Visibility Over Licensing in a Diverse Technology Market

  • View
    31

  • Download
    0

Embed Size (px)

Text of Gaining Visibility Over Licensing in a Diverse Technology Market

  • The 2016 ProcureCon IT Benchmarking Report

    Gaining Visibility Over Licensing in a

    Diverse Technology Market

  • 2

    Table of ContentsExecutive Summary .............................. 2

    Additional Contributors ...................... 2

    Key Findings ............................................. 3

    Research Analysis

    As IT spending grows, the procurement department must adapt ................................................ 4

    Managing the procurement team for peak efficiency...................... 5

    Creating visibility around cloud technology .................................... 6

    The challenges of sourcing major enterprise solutions ................. 6

    Key Recommendations ........................ 9

    Appendices

    Appendix A: Methodology ..............10

    Appendix B: Who Responded to the Survey .........................................10

    Flexera Software ..................................10

    WBR Digital ...........................................10

    Its an exciting time for IT and IT Procurement, as the increasing prevalence of the cloud promises new opportunities for a more agile approach to delivering software and infrastructure. With many in the IT procurement field predicting up to 20% growth in their cloud spending within the next couple of years, the technologys adoption is as rapid as it is promising. This creates its own set of challenges for procurement. The ease with which Software as a Service (SaaS) and Infrastructure as a Service (IaaS) solutions can be purchased makes controlling costs and optimizing utilization more difficult. This necessitates a centralized approach to cloud purchasing that can avoid redundancies, establish the right service level agreements, and extend the benefits of a single negotiation and purchase across the business as opposed to within a single business unit.

    The cloud is not the only area that requires a centralized approach to handle effectively. With major enterprise software vendors dominating the IT landscape, making sure that software license entitlements are kept track of is another vitally important role for the procurement organization. With a growing risk of vendor audits, migration to cloud based services, and a need to secure the latest functionality going forward, procurement must understand their current license position if they are to negotiate from a confident position and gain the best contract terms from their enterprise software vendors.

    Ultimately, the increasing complexity of negotiations and contract terms means that the relationship between procurement and IT must be stronger than ever, and a collaborative approach to controlling technology spending will become more essential. Procurements role around technology must evolve into that of a trusted advisor to IT, a partner in the sourcing process, and an empowered negotiator that can obtain the best contract terms, and not just the best discounts.

    Selected quotations from industry thought leaders have been used to add context to the statistical information contained in this document. Interviews centered on benchmark findings as well as key trends identified by research.

    Matthew Corsi Director, Global Technology Vendor Management Office, MetLife

    John Emmitt Senior Marketing Manager Flexera

    Ed Rossi Vice President of Product Management Flexera

    Executive Summary

    Additional Contributors

  • 3

    62% of IT procurement groups are embedded in a centralized procurement department.Procurement has successfully moved to centralize in order to facilitate a more strategic approach to spend management. By operating out of a center-led or centralized structure, a more complete view of organizational spending can be created, which in turn builds efficiency around leveraging purchasing power and avoiding risks.

    60% of procurement teams with IT responsibilities work consultatively with their IT departments.The large majority of IT procurement groups recognize that the IT department will typically be the most attuned to the needs of the organization from the standpoint of functionality. However, in order for them to be able to create the greatest level of value for the organization, they also need to be involved in the sourcing process. Now, IT procurement will play a consultative role throughout the sourcing process, working with IT as a team.

    44% of IT procurement teams manage their enterprise software license positions on an ad-hoc basis.Despite the importance of actively managing software license entitlements, nearly half of IT procurement groups will still wait till they feel they need to access this information, managing them on an ad-hoc basis outside of a centralized database. This can lead to increased organizational risk, issues with vendor audits, and decreases in the ability of a business to adequately prepare for renewals.

    Within the next two years, 27% of respondents predict that their cloud services spend will grow by more then 20%.While in some cases, cloud spending may not be a large part of an organizations current IT costs, the trend of both vendors and businesses moving towards cloud based solutions is continuing, with many businesses predicting a drastic increase over the next several years. Creating centralized views of cloud spending and utilization is another task that demands attention in the near term in order to protect value for the organization.

    Key Findings

  • 4

    As IT spending grows, the procurement department must adapt

    23%Center-led

    27% 16%

    15%Decentralized

    62%Centralized

    What is the structure of your procurement department?

    What is your estimated annual software procurement spend?

  • 5

    13%

    36%

    What is the level of control procurement has over sourcing cloud based solutions?

    How many employees make up your procurement team?

    Full oversight and control

    Consultative role assisting IT or other departments

    Tactical involvement during negotiations

    No direct involvement

    1-5

    6-15

    16-25

    26-35

    >35

    The role that IT procurement plays in sourcing for cloud solutions can reflect the level of centralized control of the department at large. While 13% have managed to fully take cloud based sourcing under their control, the most common method of sourcing is for procurement to work collaboratively with the IT department, which is the technique of choice within 60% of departments. For 23% of IT procurement groups, involvement in cloud sourcing only comes at the end of the process, where they are called in for their expertise in negotiating to close the deal. At this point, only 4% of respondents have no involvement at all in sourcing cloud technology.

    Compared to last year, the percentage of respondents who are operating with a team of over 35 employees doubled, from 10% in 2015 to 20%. However, the percentage that have a team of 1 to 5 employees also increased, albeit by just 3%. Just under a quarter (24%) have a team of between 6 to 15 employees. The pattern is a concentration around smaller teams, with a bump at the end of the spectrum, suggesting a gap between IT procurement in businesses that are still developing their roles, and those that have become key components of a centralized procurement department in mature national or multinational businesses.

    The companies that are the most mature in this space are investing in vendor management, asset management, and category planning. I would say at this point most companies have an IT procurement function, but the question is: are they managing contracts after theyre being executed. You can get a great price on the frontend, but if costs leak through on the backend through deteriorated performance, missed SLAs/deliverables and/or overstaffing of agreements, then you are shifting costs to other places in the organization.

    - Matthew Corsi, Director, Global Technology Vendor Management Office, MetLife

    60%

    24%

    23%

    13%

    4%

    7%20%

    Managing the procurement team for peak efficiency

    Many companies have very complex software environments where maintaining and understanding their licensing positions is a challenge. As companies begin to understand these financial implications they are beginning to invest in asset management tools and resources. These deficiencies pose a lot of risk for the enterprise from over-deploying software, legal costs, as well as overpaying where they may be re-buying licenses they already own.

    - Matthew Corsi, Director, Global Technology Vendor Management Office, MetLife

  • 6

    Do you believe that your IT procurement team has the necessary knowledge to effectively buy cloud based solutions?

    39%Yes

    17%Not Sure

    44%No

    Similarly, there is a divide between procurement groups that feel they have the support of their staff to effectively purchase technology contracts, and those that do not. While 17% of respondents are not sure either way, 44% believe that their team lacks the ability to source technology at peak effectiveness, compared to 39% who feel that they are able. Given the amount of spending that now goes through a sourcing process where procurement is at least tangentially involved, its surprising that such a high percentage feel that they should be more prepared. However, that may have a significant amount to do with the complex and constantly evolving nature of the technology marketplace, where the differences between on-premises software and cloud-based contracts are rapidly changing the way procurement must negotiate.

    Chart 11: What percent of your cloud services spend is for Infrastructure as a Service (IaaS), such as Amazon Web Services?

    62%