NPI Identifies Top IT Overspending Culprits for Large Hospital Networks

Share Article

To prevent overspending, hospitals should benchmark vendor pricing, optimize contractual terms, and strengthen negotiation capabilities

NPI, an IT sourcing consulting company

IT purchases are becoming more complex and most hospitals lack the up-to-the-minute, vendor-specific pricing and negotiation intel required to get a fair deal from vendors.

Overbuying and overspending on critical IT investments is on the rise within large hospital networks according to research from NPI, an IT sourcing advisory firm. The firm advises hospital networks to benchmark vendor pricing and terms, optimize contractual terms, and strengthen negotiation capabilities. NPI has identified the top areas of IT overspend as the following:

  •     Microsoft Enterprise Agreement (EA) renewals. Despite Microsoft’s transformation into a cloud leader, many hospitals doing business with are still operationally and contractually locked into on-premise implementations. This has created some misalignment between the vendor and its healthcare customers. Microsoft is intent on migrating these customers to the cloud, and is taking measures to support that intention. Outcomes include several pricing and licensing changes, a spike in formal and informal license audits (often disguised as Software Asset Management engagements), and increased contractual complexity and inflexibility. Hospital IT purchasers that don’t stay on top of these changes and risk are highly susceptible to overpaying for both on-premise and cloud solutions in Enterprise Agreement purchases and renewals.
  •     Network services. Autopilot telecom spend is on the rise within hospital networks – especially for WAN and wireline services. Despite commoditized pricing for most network services, the majority of organizations still overspend by 30 percent or more. NPI advises hospitals to reopen carrier contracts, identify redundancies and underutilization, and optimize pricing, discounts and terms.
  •     Vendor licensing audits. Vendors like Microsoft, SAP and IBM are conducting more audits, and penalties for non-compliance are becoming more costly. This is due in part to vendors’ motivations to generate associated revenue, and to more quickly migrate customers from on-premise offerings to cloud services. NPI advises hospitals take all precautions to avoid or minimize the negative impacts an audit could have on their business. The most effective tactic is to conduct a preventive internal self-audit using the same level of scrutiny that the vendor’s team would use – as well as similar tools and processes. Companies that lack the bandwidth or capabilities in-house should seek outside expertise.

Jon Winsett, CEO of NPI comments: “Conditions are ripe for hospitals to overpay for IT. IT purchases are becoming more complex and most hospitals lack the up-to-the-minute, vendor-specific pricing and negotiation intel required to get a fair deal from vendors. If hospitals want to eliminate overspending, they first have to bridge this data and expertise gap.”

To learn more about IT overspending in the healthcare setting, read NPI’s advisory note on “Healthcare IT Sourcing in 2017 – The Trends Behind an Epidemic of Overspending.” For more information on NPI’s IT sourcing and purchase optimization services, please visit http://www.npifinancial.com.

About NPI

NPI is an IT sourcing consulting company that helps enterprises identify and eliminate overspending on IT purchases, accelerate purchasing cycles and align internal buying teams. We deliver transaction-level price benchmark analysis, license and service optimization advice, and vendor-specific negotiation intel that enables IT buying teams to drive measurable savings. NPI analyzes billions of dollars in spend each year for clients spanning all industries that invest heavily in IT. For more information, visit http://www.npifinancial.com.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Hannah Bower
Bower Communications
+1 404-247-1123
Email >
Visit website