Now more than ever before, software applications play a central role in business operations. Employees are increasingly carrying out their most important daily tasks via programs that provide centralized platforms for company processes and assets. Furthermore, the rise of cloud computing has coincided with an increase in the number of applications at play in many enterprises, a phenomenon that is streamlining the way employees work while also making IT environments more complex.
These changes are having major impacts on the procurement process for contemporary IT departments. Software-as-a-Service solutions are delivered over the Internet rather than through networks maintained on-site, so firms don't need to expand their in-house infrastructures in order to add new applications to their arsenals. As such, strategic sourcing priorities in business technology have moved from procuring physical servers to obtaining software.
How software upturns traditional procurement
As intuitive as this shift may at first appear, given the prevalence of remote cloud hosting in today's enterprise IT environments, companies are beginning to experience some of the difficulties that arise from this development. In a column for InformationWeek, Skookum Digital Works Chief Strategy Officer Josh Oakhurst pointed out that as firms increasingly find they need customized software programs built specifically for their needs, obtaining these resources means rethinking procurement.
"Custom software development is not something you should purchase like paper clips. Procurement departments are wired to haggle over incremental per-piece pricing, volume numbers and delivery dates," wrote Oakhurst.
He also suggested that the need to rethink procurement for custom applications is based in part on the different conception of supply and demand inherent in many software vendors' business models.
"Pre-packaged technology providers have 'inventory' sitting on the self; they sell what's in the box. In contrast, custom technology consultants take pains to map out investment options and craft custom software executions," Oakhurst noted.
Procurement departments must consider software sourcing in a different way than they think about obtaining other products: Oakhurst suggested approaching custom application vendors more like management consultants. He also emphasized the need for procurement professionals to prioritize speed of decision-making in their negotiations with prospective software suppliers.
A whitepaper from IT management firm Kaseya echoed Oakhurst's insistence on maintaining operational speed, taking the notion a step further to suggest that companies should also streamline the way they process procurement requests internally.
"Aligning IT operations with business processes and procedures makes stake holders accountable to approvals and keeps the process moving through to next steps," the firm stated.
Businesses should approach software procurement management with the high level of agility that is characteristic of the cloud age.