Overview of the IT Industry
Globally, the rising spend on IT across prominent sectors such as the healthcare, retail, and transportation is stimulating the growth of the global IT industry. IT solutions help businesses create, manage, and optimize information efficiently. The growth of the sector can be attributed to factors such as government-backed reforms and significant investments in IT. In this age of technology disruption, prominent companies are facing increasing pressure to redefine their technical capabilities and improve the time-to-market for the products and services. Although the IT industry is witnessing promising growth, several factors that may curtail the growth of the industry include:
- Security threats: With the increase in innovations, technology not only plays a pivotal role in bringing about a digital transformation but also has an adverse effect on the security. Therefore, it becomes important for businesses to efficiently monitor their technology and prevent the outbreak of any security threats. Also, organizations should ensure to implement better cybersecurity measures to improve their service architecture and eliminate security threats.
- Regulatory environment: Technology companies generally face a host of regulatory challenges in terms of privacy and data sovereignty. With the implementation of stringent regulatory policies, businesses are facing challenges when it comes to handling data sets while reducing any chances of catastrophes. Moreover, organizations should also ensure that they provide end-to-end protection while handling the data.
To address such challenges and better analyze cost factors involved in the process, organizations are opting for cost model analysis. Cost model analysis helps IT solutions providers to calculate and compare their financial information and point out gaps to bridge the uptake of cost. Moreover, cost model analysis also helps IT solutions providers to effectively allocate their resources to meet the business objectives.
The Business Challenge and Our Journey
The client, a prominent IT solutions provider, wanted to identify the cost elements and assess the impact of each cost driver on the overall costs. With the help of a cost analysis solution, the client wanted to identify the direct and indirect costs, intangible costs, opportunity costs, and the cost of potential risks. The primary objective of the engagement was to compare the aggregate costs of the services and determine if the benefits outweigh the costs. In addition, the IT solutions provider also wanted to compare the outsourcing options with in-house capabilities.
To efficiently devise a quantitative cost modeling solution, the procurement experts at SpendEdge carried out extensive research comprising interviews and discussions with prominent stakeholders in the IT industry. Additionally, the experts also compiled information from reliable sources such as trade shows, paid industry databases, and company presentations.
The cost analysis solution offered by SpendEdge helped the IT solutions provider negotiate levers adopted by suppliers to ensure low-cost raw material sourcing. The client was also able to achieve the lowest cost mix and create a scenario-based cost modeling solution. Moreover, SpendEdge’s cost analysis solution also assisted the IT solutions provider to collect the supply market pricing data and the cost movement scenario for all the cost elements.
Fundamental questions answered in this cost model analysis include:
During the course of the engagement, the IT solutions provider was able to determine the fair market pricing while negotiating with the vendors. The engagement also helped the client negotiate with the suppliers to ensure maximum profitability. Furthermore, the engagement also helped the IT solutions provider improve service value while increasing the overall profit margins.