How Procurement and IT Can Manage the Proliferation of Business Technologies

Companies have seen a surge in the adoption of Software as a Service (SaaS) technologies, often without the knowledge or approval of IT departments. While empowering for end-users, this trend can lead to increased operational costs and duplicate software services, complicating the IT landscape.

Even the sheer volume of software used by companies can introduce complexities. According to a study by Statista, the average number of SaaS applications used by organizations worldwide in 2022 was 130, and that number is still trending upward.

This article delves into how procurement teams, alongside IT departments, can effectively manage the burgeoning array of business technologies to optimize cost, drive efficiency, and maintain data compliance.

Risks Associated with Unmanaged Software Proliferation

Unregulated software proliferation within an organization, often due to end-users purchasing software without proper authorization, presents significant risks. This unchecked behavior can lead to a variety of issues that can negatively impact operational efficiency, cybersecurity, and budget control.

Here are some of the risks associated with unmanaged software proliferation:

• Duplication of Software: Different teams may unknowingly purchase the same software, leading to unnecessary expenses and confusion.
• Cybersecurity Threats: Unvetted software may not meet the organization's security standards, thus posing potential cybersecurity risks.
• Compliance Issues: Unauthorized software can lead to non-compliance with data protection regulations, potentially resulting in legal and financial repercussions.
• Resource Mismanagement: With more software to manage, IT departments may find themselves overstretched and unable to provide support effectively.
• Incompatible Systems: Not all software solutions work together seamlessly. Purchasing without a holistic view of the company's software ecosystem can lead to compatibility issues and hinder productivity.

These risks highlight the crucial role of centralizing software procurement and management to effectively govern the IT landscape within an organization. In the following sections, we'll discuss how procurement can get a handle on software proliferation and manage these associated risks effectively.

The Role of Procurement in Regulating Software Acquisition

Procurement has a pivotal role in regulating software acquisition, ensuring the organization only adopts necessary and compatible technologies.

The first step is for procurement to work closely with IT, establishing a clear software acquisition policy that all employees must adhere to. This policy should stipulate that any software acquisition must be vetted by both IT (for technical compatibility and security) and procurement (for contractual and cost considerations).

A Centralized Software Procurement System

The second step is to establish a centralized software procurement system, accessible to all employees but controlled by procurement. This system would allow end users to request software while allowing procurement and IT to vet these requests before approval.

According to software, consulting, and managed services firm GEP, "Business priorities often define the choice to opt for a centralized procurement model, especially when it comes to maintaining optimum inventory levels as well as supplier visibility. Centralized procurement means increased purchasing volume, which can potentially drive down costs."

With this system, procurement can ensure that the software doesn't duplicate existing tools, meets security standards, and fits within the budget. Larger companies, however, may find this system too constraining and will therefore require a tiered or hybrid purchasing system.

Software Asset Management Tools

Finally, procurement can leverage technology to better manage software acquisitions. Software asset management (SAM) tools can provide an overview of all software in use within the organization and highlight areas of duplication or underutilization.

By using SAM tools, procurement can gain better control over software spend and usage, helping the organization optimize its IT resources.

Managing Data Usage Rights in The Company's Software Environment

Managing data usage rights within a company's software environment is crucial to ensure not only software but also people are working collaboratively to meet business goals. If data is fragmented or siloed between departments, or if departments aren't sharing accurate data back and forth, this can lead to bottlenecks, slowdowns that require manual processes, and other issues.

Both procurement and IT departments have a significant role in ensuring data is utilized effectively, securely, and within the established data governance standards. Here are a few ways to better manage data usage rights:

• Understanding the Licensing Agreements: Before procuring any software, it's essential to understand the terms and conditions of the licensing agreement, especially those pertaining to data usage rights. IT and procurement should collaborate to ensure the company's rights and obligations are clear and in line with the organization's data policies.
• Implementing a Data Governance Framework: A robust data governance framework should be established. It should outline the protocols for data access, usage, and storage across all software tools, ensuring the organization remains compliant with data protection regulations.
• Educating Employees: Employees should be educated about the implications and responsibilities of data usage rights. This includes understanding the sensitivity of data, privacy considerations, and potential legal implications of misuse.
• Regular Audits: Regular audits of software and data usage can help identify any potential issues or breaches in data usage rights. Audits can also identify underutilized software, which could be an opportunity for cost savings.

By proactively managing data usage rights, procurement and IT departments can ensure that the company is making the most of its software investments while mitigating risk and maintaining compliance.

Get a Better Handle on Your Software Purchasing

In the era of digital transformation, effective management and regulation of software acquisition is paramount. By implementing strategic procurement practices, leveraging technology, and fostering a culture of data responsibility, organizations can control software proliferation, optimize resources, and drive productive, cost-efficient operations.

To learn more about how you can get a better handle on your organization's software procurement and management processes, don't miss ProcureCon IT Sourcing 2024. It's happening at Westin Copley Place in Boston, Massachusetts from June 3rd to June 4th.

Download the agenda and register for the event today.