Procurement expert Adrian Sharples highlights how CIOs are prioritising increasing agility and expanding their supply base to deal with global fiscal disruption.
According to Gartner, 2022 is the year ‘the future returns for the CIO’. IT leaders are accelerating IT investment as they recognise the importance of flexibility and agility in responding to disruption.
But it’s important to get there in the most cost-effective way possible. Global business is shifting to a post-pandemic way of working. Therefore, it’s important to be aware of the realities of the current IT landscape to prepare for the future in ways that will protect you against volatility.
At Globality, our procurement platform has allowed us to spot trends in this complexity you might not yet be aware of. Over the past few months, we’ve seen billions of dollars of IT spend across many industry segments. And we’ve performed analytics to see what is really happening. And these are the key trends that have emerged:
IT spend is increasing, but with a new focus on value
Gartner says IT consulting and managed services spend will rise by more than 10% this year. That prediction is supported by the projects being sourced via the platform. However, the economic downturn has focused minds, and CIOs are seeking to ensure their spend generates the best value possible.
For example, many services previously performed by the internal organisation are being turned out to managed service arrangements. In parallel, existing managed service contract suppliers are being asked to rebid as Finance teams aid CIOs in squeezing cost savings as they invest in new technologies and accelerate digital transformation initiatives.
Price inflation and staffing shortages are leading IT leaders to re-evaluate demand, focusing on optimisation of consumption and paying a lot more attention to pricing. Services paused during the pandemic have been permanently re-evaluated as to utility, rather than simply renewing agreements defined pre-COVID. We are seeing global companies such as British Telecom and Santander starting afresh to rescope exactly what they feel they need and eliminating the nonessential.
Cloud spend is sky-high, and still rising
IDC is forecasting spend on the cloud to exceed $1.3 trillion by 2026. Of this sum, it is estimated that more than $750bn will be spent on driving innovation and growth, as well as accelerating product development and providing scalability.
These predictions of exponential growth in cloud spend are confirmed by the projects we are seeing being actively sourced through our procurement platform. Companies are consistently sourcing cloud projects north of $5m, and on various cloud services. In particular, data hosting, and migration of legacy applications to the cloud continue to be daily high-traffic searches.
As leading global business needs are becoming more sophisticated, IT leaders are investing heavily in cloud-based solutions to deliver on expectations. They are looking to inject speed, reduced cost and resilience into operating models and processes.
Companies aren’t sticking with the same old faces
Since the Credit Crunch, the predominant theme in IT spending has been that once locked into a commercial arrangement, an estimated 70% of that spend stays with the same supplier portfolio. Often, buyers stay with what they know as they see the cost of disruption to operations being a deterrent to change. Historically, keeping a slimmed-down supplier portfolio has been seen as a mechanism to help reduce complexity.
However, over the past year, this pattern has started to change. We are noticing a significant increase in competitive sourcing events. Clients are seeking to drive better outcomes at a lower price point. We see CIOs turning to the marketplace to procure new tools and solutions that can unlock value. At the same time (typically, actively partnering with procurement), they are looking to leverage AI-powered sourcing technology to help navigate which of the myriad providers can best meet their needs.
Why AI? Sourcing teams are taking advantage of natural language processing features capable of reading and interpreting the way a user expresses needs and requirements. Having that step sped up with AI help means they can identify the very best service providers for highly-specific requirements.
The same technology is being used to support negotiations with suppliers. Intelligent sourcing platforms can act as the central repository for all requests for quotes and provider proposals—building up deeper intrinsic organisational knowledge and insight over time.
What does this mean for the CIO?
2022 so far has been defined by soaring inflation across many major markets. This is now filtering through every aspect of business.
As a result, we expect CIOs to continue to aggressively use IT to reduce operating costs, optimise headcount, and drive automation to deliver tangible impact and value through digital transformation—cashing out Gartner’s prediction that this really is the year the future returns for the CIO.
The author is IT category lead at Globality, whose indirect spend management platform is used by leading global companies, including British Telecom and Santander.
Globality is the leader in maximizing outcomes for indirect spend. Leveraging our state-of-the-art sourcing platform, leading companies around the world are able to source with more agility to drive better outcomes. We help our customers move more spend to self-service without sacrificing compliance so that teams can do more with less and move faster. Our intuitive, intelligent and efficient software delights business stakeholders while delivering more than 20x ROI. In January 2021, Globality raised $138 million from Sienna Capital and the SoftBank Vision Fund, bringing the total investment it has raised since its founding six years ago to $310 million. For more information, visit www.globality.com
