The Advantages of Using Cost Management Services for Your Business

IT tools and technologies power teams throughout your entire company, from your cybersecurity department to your sales teams. The need for the right IT solutions means modern business can’t run without cost management from software procurement solutions.

But here’s the problem: how do you approach software asset management? How do you choose an IT vendor that you can trust to provide a quality solution at a suitable price for your budget?

Software procurement is becoming a significant expense for companies across all industries. A recent study found that spending on software and related electronics in the automotive industry alone reached a combined US$238 billion in 2020 — and it’s expected to reach US$469 billion by 2030. The same study concludes that organizations with streamlined IT procurement processes achieve greater operational excellence and a notable competitive advantage.

Yet, many companies struggle with IT procurement, often overspending when it comes to IT sourcing, spending too much on researching solutions, negotiating, and managing dozens of quotes from various service providers.

What can be done to ensure that your teams have the tools they need at the right price? The answer is excellent cost management processes and procedures. Read on to learn more about how you can better manage costs with improved strategies.

Enter Cost Management

Cost management in a nutshell is the estimation of how much a project will cost to undergo and the allocation of resources in order to control those expenses. The procedure, which is typically laid out during the initial planning phases, is involved at every stage of the completion of the project:

  • Planning phases are used to determine projected costs early on
  • Intermediate phases while the project is underway are used to document and track expenses to ensure that they stay within the procurement management plan.
  • Post-completion phases involve comparing the predicted and actual costs to calculate the variance, which is then used as a benchmark for future project budgeting.

Cost management, of course, can involve more than just the monetary values. It can also look at:

  • The quality of the goods and services delivered
  • How compliant and trustworthy your suppliers have been
  • Which products have proven to be the most useful to your company
  • Contract management, or searching for the best terms and conditions for working with business partners and vendors

“Cost” can encompass more than just monetary value. It can also involve allocating staff and resources to a particular project and balancing risk and opportunity when choosing new suppliers to work with. If you choose an IT service provider for a software solution, for instance, you have to be sure that the company is able to help you out with technical support and customer service when you need it.

It’s also important to make the distinction between overall cost management and cost control, a contributing process that works within cost management. Cost control mainly involves checking on how well the project is following budget plans and making corrections in real-time to prevent budget overruns. Cost management involves cost control as well as prior planning phases and post-project efforts to learn from any mistakes made.

Why Procurement Strategies Need Cost Management

Cost management is an invaluable practice for project planning, where major decisions have to be made early on. For instance, what IT services will be necessary for the near future for the company? And is the budget mapped out so that resources are sufficient for your workflow? Project planners care about cost management because:

  • It sets your expectations early on: You can communicate transparently with both customers and internal stakeholders regarding what IT tools and services will be available. And when it comes to planning out projects, cost management controls scope creep by pre-defining what resources will be used. In a world where a quarter of project professionals struggle with “unrealistic” budgets, cost management will be imperative.
  • It tracks progress on an ongoing basis: Instead of running out of resources partway through a project, cost management tracks progress regularly and allows you to implement corrective action in case the budget runs unexpectedly low. This way, you can maintain your return on investment.
  • It maintains vendor relationships: Businesses today work with many IT infrastructure service providers, and keeping vendor risk under control can be a challenge. A major component of cost management is checking on the compliance of your IT suppliers, ensuring that all your partnerships are trustworthy and don’t pose a threat to the work you do.
  • It allows you to plan for the future: Cost management continues to help even after the project finishes. By generating and documenting spending data, you are developing benchmarks for future projects to use, predicting future expenses more accurately, and optimizing costs later down the road.

In the long term, procurement managers utilize cost management to analyze long-term financial trends and check whether or not IT procurement teams are working in line with overall company objectives.

Implement Effective Cost Management with the Right Procurement Partner

It’s clear that businesses suffer from various frustrations when it comes to IT cost reduction. From saving money and time during the process to avoiding risky vendors, navigating the complex market for business solutions seems far too daunting to take on.

Don’t waste any more time or resources sifting through a massive list of potential vendors or hundreds of different contracts. 

Fortunately, true procurement transformation is only a quick meeting away. 3Quotes is a trusted IT procurement consulting agency to help you revolutionize your IT procurement processes. 

We understand the needs businesses have when it comes to IT solutions and have expertise and market connections to find you powerful IT solutions at affordable rates. Ready to improve your IT cost management strategies? Contact us today to start making the most of your IT budget.