There isn’t an IT sourcing and vendor management (SVM) client that I’ve spoken with in the past seven years – Forrester explicitly started writing for SVM professionals in 2006 – that hasn’t mentioned gaining more influence with executives as a key priority for their teams. A key reason for this lack of stature with the business, and often the resulting lack of promotion opportunity, is that IT's SVM staff are seen as focusing on an “indirect” spend category; they’re not responsible for buying/managing relationships for the core commodities that are used to make their company’s products (“direct” spend). However, that is about to change, as software and application development services are becoming direct spend for many companies.
Until recently, most companies made physical products by purchasing raw materials and building the products in factories. The factory operations were the heart of the business, supported by the sourcing of the raw materials needed to make the products. But more and more, physical products depend on software and other technologies to be viable. And while we traditionally thought of only high-tech companies as making software-dependent products, nontechnology companies of all kinds – retailers, banks, automotive companies, and others – rely on software as the key interface of their products. For example:
Technology defines how customers feel about their banks. Checking accounts are commodity products, where most customers interact with the product online – either through an ATM, a web browser, or a mobile app. The effectiveness of a bank’s apps will mean the difference between satisfied customers and those who choose to take their money elsewhere.