Three Tactics to Survive the Acceleration of Digital Transformation

Hi folks, Mike here. I recently spoke with Kim Addington, COO of NPI (one of our newest community sponsors), about the profound impact IT procurement is having on helping companies navigate uncertainty and disruption. We agreed to publish portions of this discussions for a couple of reasons.

First, IT procurement practitioners deserve recognition for their role in keeping the business up-and-running during an historic period of disruption. Full stop. Second, disruption isn’t going anywhere. Whether positive (digital transformation) or negative (the pandemic is an obvious example), helping the business survive unexpected change is part of the job. And one that is getting tougher by the day.

Mike: You have a unique vantage point on how business resiliency and IT procurement intersect. Can you share a little bit about that?

Kim: NPI has always had an inside view into how different IT procurement organizations respond to disruption. We work with 500+ enterprises across a large cross-section of industries. Many we’ve supported for years – through the financial crisis and recession, through industry transformation and upheaval, mergers and divestitures, and now through a pandemic.

IT procurement has always been on the front lines of executing critical business initiatives in response to change, but the pandemic has pushed the function into the spotlight. It’s been said COVID-19 accelerated digital transformation by six years, and we certainly saw that in many of the organizations we support. Telehealth is a good example of how a long-term initiative became a necessity overnight. At a minimum, most organizations had to make material changes to their IT ecosystem to support remote workers.

What we saw across the board is that procurement organizations had to contend with priorities that changed overnight, faster buying cycles, faster implementations, new business and technical requirements, and new vendors and technologies. And those challenges aren’t going away. Most businesses are either rushing to keep up with an accelerated pace of transformation or are under pressure to maintain the operational and competitive advantages they’ve already achieved. One survey by TechRepublic shows that 47 percent of tech leaders plan to spend even more on digital transformation in 2021 than they did in 2020.

Mike: In some of the insights NPI has published, you talk about a new mandate facing practitioners. What does that mandate look like and how is it different than previous expectations?

Kim: The pandemic exposed a lot of weak links in many businesses, and leadership doesn’t want to get caught off guard the way they were a year ago. They’re making it a priority to prepare for how they will navigate the next large-scale disruption, and that’s ushering in a whole new set of IT initiatives that have support all the way to the boardroom.

It’s also causing a lot of businesses to reexamine how IT procurement can contribute to increased IT agility that has built-in cost management guardrails. The need to easily respond to changing business requirements with minimal disruption and well-managed cost is now an IT sourcing imperative.

Mike: What are the most important things IT procurement practitioners can do right now to help the business be more resilient amid change?

Kim: That’s a good question because it’s important to emphasize the “right now.” IT procurement is going through its own transformation and with that comes new processes, methodologies, supporting technologies, etc. – all of which are important. But practitioners also need readily deployable tactics that can deliver immediate improvements in responsiveness to business stakeholders and best practices in financial stewardship.

We recently published a list of eight things practitioners can do to improve business resiliency, but I’ll focus on what I believe are the top three.

First on the list is securing forward-thinking price and contractual protections that lessen the cost and risk of transformational change. Examples include well-negotiated tiered pricing, upgrade/downgrade structures that allow for changes in demand, and the ability to rollover unused “units” for underutilized IT assets. Another example is renewal protection – contract language should either remove or cap the ability to increase pricing for a specified period of time.

Second is eliminating toxic spend across all large software estates. The two largest culprits are overpaying for IT purchases and software over-licensing. Performing IT price benchmark analysis for renewals and new purchases will validate you’re getting a fair deal from your vendor and ensure you pay a price that’s at or better than market. It’s also important to  optimize licensing across major software estates (SaaS and on-prem). This will help you identify areas where you’re over- or under-licensed and ensures you’re only paying for what you actually need. Chances are you will end up getting rid of shelf-ware that’s inflating subscription, maintenance and support costs.

And the third one is rationalizing solution overlap. New technical requirements driven by transformation projects have caused a lot of companies to look outside of their existing vendor/solution portfolio – often without first evaluating whether existing investments can meet those requirements. Now is a good time for companies to clean up redundancies in their IT environments, identify solution overlap, and leverage existing vendor relationships (and spend) to rationalize.

Mike: One tactic in your original list of eight that you haven’t talked about was the need to be super vigilant about software license compliance. How does this impact business resiliency?

Kim: Companies need to be every bit as obsessed about software license compliance as their vendors are – and that’s even more important right now. In the rush to adapt to changing business and technical requirements, it’s easy to miss important consequences on the compliance front. Vendors know this and we’re seeing more software audit activity than ever. If you’ve made material changes to your IT ecosystem or have a large renewal coming up, now is a good time to conduct a license position assessment on your large software estates so you can remediate compliance gaps before your vendor spots them. Nothing slows down transformation like an unexpected multi-million-dollar audit invoice.

Be sure to check out NPI’s partner channel (#partner_NPI) for IT procurement insights.