Gartner recently cut their expected IT budget prediction from 5.1% to just 2.2% in 2023. This is three times lower than the projected 6.5% global inflation rate. As the world continues to experience economic uncertainty, IT leaders look to tighten budgets, consolidate tools and resources, and generally become more risk-averse when evaluating new investments. So how can you request a new investment from your decision-makers while ensuring minimal costs and maximum ROI this year?
Here’s four pieces of advice from procurement on how to evaluate and propose new IT investments during an economic downturn.
Involve your procurement team from the beginning
McKinsey surveyed more than 1,100 organizations worldwide and found that the best-run procurement teams can generate twice the annual savings of those in the lowest quartile. Procurement professionals are skilled at negotiating contracts, identifying cost-saving opportunities, and evaluating vendors.
By bringing them into the conversation early on, you can leverage their expertise and get the best cost and contract structure available upfront while you focus on the technical requirements. This can also help you avoid a long and onerous contract process with better quality in the long term.
To get started, develop a list of criteria your IT and security investments should meet. This might include things like cost, feature set and functionality, reliability, scalability, and vendor support. Once you have this list, work with your procurement team and use it to evaluate potential solutions and vendors.
Consider the total cost of ownership
When investing in IT and security, businesses need to consider more than just the initial purchase price. The total cost of ownership (TCO) considers all costs associated with an asset over its lifetime, including shipping, taxes, installation, training, maintenance costs, and more.
In a survey by Deloitte, 65% of organizations reported that cost reduction was a top business priority, and 52% cited TCO reduction as a key strategy for achieving this goal. By evaluating TCO, businesses can make more informed decisions and avoid unexpected expenses down the line.
Reduce the perception of cost
Change can be scary, especially if there are dollar signs attached to it. By reducing the perception of cost and associated risks, you can help decision-makers feel more comfortable with investing in new solutions and technologies.
To do this, consider taking the following steps:
- Validate proof: Check references and testimonials, ask for proof of concept, and talk with the vendor’s partners. Compile this information and use it as part of your analysis and presentation to decision-makers.
- Focus on positive impact: Focus on the benefits and ROI of the proposed investment, such as increased productivity, better security, or improved customer satisfaction. Present these benefits in a clear and concise way, using data and real-world examples to support your case.
- Consider your company scorecard: Your procurement team has a scorecard with clear metrics to evaluate purchase decisions. Consider their metrics to make informed decisions and best support your proposed investment.
- Present the facts and numbers: Be transparent about the costs associated with the investment. Provide detailed information about the total cost of ownership, including any ongoing maintenance, support, or upgrade costs. This can help decision-makers understand the full picture and make informed decisions.
Evaluate the risk of doing nothing
In addition to ROI, it’s also important to consider the risk of doing nothing. This may include lost productivity, increased downtime, and slower time to market. Provide decision makers with credible industry research, as well as your own team’s statistics to support your request.
For example, if you’re proposing to invest in a security solution powered by AI and machine learning, it would behoove you to present cost savings from automated security, such as that from IBM.
Or if you’re finding that building your in-house web application platform is locking you in, report on the specific challenges associated with the project, such as hidden costs, maintenance fees, and compliance issues your team faces. These are common problems that procurement and IT/security professionals should work together to address.
Wrapping Up
Collaboration between procurement and IT/security professionals is crucial to evaluating current and future investments in order to minimize costs and maximize ROI, especially during an economic downturn. By clearly defining needs and requirements, evaluating TCO, and performing risk assessments, these teams can work together to help their business leaders make more informed decisions for an improved bottom line.
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