Fixing a $1 Trillion Business Process

This guest blog was contributed by Archana Penukonda | 8/21/13
If you’re looking for business processes that will deliver big returns in both savings and efficiencies through optimization, look no further than your IT technology procurement processes.

Enterprise IT procurement is a big-ticket item. Forrester estimates that worldwide business and government spending on IT software, hardware and services will exceed $2 trillion in 2013 alone. This number is bound to grow as companies continue to invest in new technologies for competitive advantage.

But technology procurement processes are typically inefficient and prone to suffering the consequences of human error. The IT environment is changing quickly, with vendors and products in constant flux. Procurement teams struggle to simply understand and execute current requests and get costs under control, rarely having the time or ability to analyze spending or optimize processes.

Understanding the barriers to optimization

Because of the dollar amounts involved, IT procurement is a prime candidate for process optimization. However, you’ll have to solve a few entrenched problems first.

1. Disjointed systems and processes

The procurement process spans many different systems and people from request to implementation:

* Initial request: Staff may request equipment or software using IT service management systems such as ServiceNow or HP Service Manager.

* Procurement/fulfillment: Procurement staff use systems from vendors such as Ariba or SAP to manage purchase orders and work with suppliers. 

* Deployment: IT deploys and tracks software and hardware with a variety of different tools, ranging from custom tools and processes to vendor-specific tools (Microsoft SCCM or Radia Client Automation) and data center tools from vendors such as IBM, HP and VMware.

* Validation: Inventory and discovery tools determine where technologies are deployed and whether they are used; this insight is essential for purchase optimization. IT Asset Management (ITAM) solutions like HP Asset Manager or ServiceNow Software Asset Management (SAM) provide some level of asset-utilization tracking.

Unfortunately, these systems are rarely well integrated. Manually moving data between systems (such as re-entering data into purchase orders) is time-consuming. Any mistakes or missed handoffs can lead to costly errors, overspending and underutilization.

2. Inconsistent data

From the manufacturer and reseller through distributors and more, each player in the supply chain refers to the same piece of equipment or software in different ways, making automated visibility a challenge. Without a common language of IT, procurement teams have to reconcile inconsistent data to determine how requests fit in with existing equipment and licenses.

3. Missing information

Procurement decisions often suffer from incomplete data. In analyzing IT-related purchase orders for four of the world’s largest financial institutions, BDNA found that more than 60 percent of purchase orders had the following problems:

* Missing data: Several POs had important fields left empty.

* “Hidden” data: There was data stored in unstructured (text) fields in the PO, essentially hidden from automated systems for analysis.

4. Lack of feedback loops

To optimize a process, you have to measure it. For many organizations, measuring the effectiveness of procurement processes is nearly impossible. Because discovery and inventory systems report asset information inconsistently, procurement teams have little visibility into how their purchases are actually deployed and whether they are overspending or violating license agreements.

Four essential steps to optimizing IT procurement

These barriers are significant, but not insurmountable. If you want to optimize the enterprise IT purchasing process, start with the following four steps to create a foundation for continued improvement.

Eliminate manual handoffs and disconnects between systems. Improve integration across systems using a central database, such as a configuration management database, and platforms from vendors like ServiceNow, HP or BMC that span different phases of the procurement process.

Improve visibility with consistent data. Use a catalog that translates the different systems to a common, standard terminology so procurement, distributor, reseller and vendor data are consistent.

Complete the data. Automate the extraction and completion of critical data such as the missing or hidden information in purchasing systems.

Build in feedback loops. Analyze the effectiveness of your purchasing by matching procurement with utilization. Make sure that IT spending is aligned with actual business needs and processes.

With these steps in place, you can finally realize the benefits of process optimization. Not only will you streamline technology procurement processes (making everyone happier), but you can also reduce overspending. With complete visibility into what you already have and how it’s being used, you can make smart decisions and negotiate the most favorable terms. And better visibility will help you maintain licensing compliance, avoiding costly payouts from vendor audits.

Archana Penukonda

Archana Penukonda is a senior product marketing manager at BDNA Corp., a Mountain View, Calif.-based Data-as-a-Service solutions provider.