Software Development Services Category Procurement Intelligence Report

The market for End User Software and Hardware and its sub-segments such as Software Development Services are at an interesting intersection. The cut-throat competition in the category is compelling suppliers to go aggressive on their pricing structure and increase their spend on sales and marketing activities. As a result, most suppliers are feeling a pressure on their margins and trying to offer higher margin value added services to have a better control on their profitability.

In a bid to differentiate themselves in an overcrowded technology space, suppliers are now focusing on creating industry-specific specialized products. Buyers see this trend as an opportunity to procure more targeted solutions and are developing internal capabilities to identify and leverage innovations in the supplier base.

Stringency in the regulatory norms pertaining to data protection and cybersecurity has increased compliance and security burden on suppliers. These additional costs have a potential to drive marginal increase in prices across the key geographies.

Trends like these and many others discussed in this report are necessitating a relook at the way Software Development Services is procured and the procurement cost saving opportunities that exist.

Software Development Services procurement best practices are moving towards a level of sophistication which is typically seen in traditional procurement categories. Category managers now have an attractive opportunity to adapt the best practices seen within this category as well as those being leveraged in other non-related categories. This report summarizes the best practices picked from across multiple categories that could work well for category managers involved with Software Development Services procurement strategy.

For example, Buyers should ask for a detailed account of the data protection capabilities of the supplier. In addition, buyers should also enquire regarding the redundancies available during instances of outages or disruptions. While some providers can provide backup, others may have limited capabilities in hardware redundancy.

Buyers must clearly define clauses pertaining to the ownership of subcontracting services that are not a part of preferred suppliers' portfolios. Subcontractors should be bound by the same terms and conditions as the main contractor to ensure consistency in quality and manage any adverse event such as data breach.

Investing in benchmarking studies not only helps category managers to improve their knowledge about market pricing or billing rates but also in negotiating with suppliers. In fact, this holds true for all technology procurement sub-categories.

Software Development Services procurement managers also need to proactively identify and mitigate potential risks that can arise in the supply chain or contracts for Software Development Services procurement. Some examples include: