Business Technology Is NOT Shadow IT Spend

Often I hear from clients or read in industry publications (including those by my Forrester colleagues) that the business is spending more on technology. They almost always refer to this spend as “rogue” or “shadow.” But this phrasing shows a perspective from sourcing and other IT professionals that is parochial and, worse, dangerous to their ability to collaborate with those business stakeholders.

Why? Because saying that the business’ IT spend is shadow spend implies that they are taking something from the IT group. However, the reality of the situation is that business buyers like CMOs are buying what they always bought – advertising, marketing tools, database list management, for example. The difference now is that all of those things are now technology-dependent. Any CMO or other executive buying these offerings has a very logical question when asked about bringing in IT – “what makes IT think they know more about this stuff than I do?"

Still not sure if the business is actually engaging in “shadow IT spend?” Here are a few questions to ask yourself:

  • Is this a product category or supplier IT has experience with? Most IT SVM teams haven’t negotiated with digital agencies like Ogilvy or TribalDDB before. Also, note that if it’s a division you haven’t worked with, the answer to this question is still “no.” – such as when your company’s supply chain team is working with PwC’s risk team – but you’ve only ever worked with PwC’s IT strategy group. This then validates the business users’ view that they’re better placed than IT SVM to do the negotiation because of their knowledge of the vendor and its solution.
  • How much of the overall solution can you provide guidance on? Using the digital agency example again, perhaps SVM knows a lot about negotiating labor-based services contracts. But do you know anything about the competitive landscape for digital agencies? What’s their business model, what are the market rates for this work? Without knowledge of the spend category (digital marketing agencies, product development firms, etc.), SVM’s primary contribution is really general process expertise. Ultimately, unless SVM can offer advice on at least 50% of the negotiated solution, it’s likely that business users will decide that it’s easier for them to learn the negotiation tactics than it is to teach SVM about the spend category – and therefore handle the negotiation on their own.

Rather than complaining that the business is spending money that you think belongs in your control, ask: "How well can I demonstrate that I can support those business users, marrying my expertise with theirs?" If you can swallow your pride enough to forget the idea that business users are coming into your sandbox, and instead understand that they’re likely concerned that you’re trying to get into their sandboxes, you can appropriately adjust the way you approach those users and move forward to a better collaboration. Some steps to do this include:  

  1. Understand which business areas are most likely to become technology dependent
  2. Research those technology-dependent areas to supplement your existing technology knowledge
  3. Plan a strategy for where you apply your own sourcing expertise to improve this spend
  4. Reach out to the key stakeholders to demonstrate how you can help them achieve their business goals
  5. Teach business executives and their teams how to effectively govern technology vendors (or vendors that have become technology-dependent)

I’m kicking off research in 2014 to discuss how SVM professionals can help make technology a “direct spend” category, and make themselves more important to the business overall. If you have any ideas of examples of how you’ve convinced the business to work with you on sourcing technology-dependent business solutions, I’d love to hear them. 

Comments

excellent point!

Thanks for clarifying a distinction that is often hazy. When a line of business spends on data or applications, that should clearly not be considered "shadow IT". But is that to say that LOBs aren't spending on actual IT infrastructure and the labor necessary to run it?

No judgment here. As far as I'm concerned, the CIO who can't make the case that the shared services infrastructure provides all the capability and security required at a unit cost below what can be found on the market or in the cloud deserves to be bypassed. I'm just wondering what proportion of "shadow IT" is data and apps as opposed to nuts and bolts.

William Freedman
thecasemaker.wordpress.com
@ITcasemaker