Market Intelligence within Software Procurement

Abstract

With the dawn of the digital era, software solutions are becoming of increasingly strategic importance for corporations, and due to the complexity of the products and the huge lock-in effects which they often give rise to, software-procurement is growing into a critical activity. However, due to the phenomena of information overload, finding and making use of the right information when making strategic decisions is becoming increasingly difficult, resulting in the need for organizations to overlook their information processing capacities in order to ensure the quality of such selections. For this purpose, Ingka Group Procurement Digital & Tech: Software Category has identified a need for a Market Intelligence function within the division, and this thesis aim is to explore what activities that function should entail.

For this purpose, the thesis aims to identify what the main challenges are related to procuring in software markets, what information needs software-purchasers have and lastly, how this information should best be communicated in organizations related to the information's inherent complexity. This was investigated through a literature review, followed by interviews with both software market-experts and software-purchasers at Ingka Holding. This resulted in an analysis of the software markets and compilation of the identified information requirements, which were then analyzed from an Information Processing Perspective. Recommendations on how to communicate the information were thereafter developed together with a suggestion on what the main Market Intelligence-activities should entail. Lastly, a roadmap for how to implement said function at Ingka is presented.

Popular Abstract

Why are software-purchasers critical for corporations and what do they need to know?
With the dawn of the digital era, software solutions are becoming of increasingly strategic importance for corporations, and due to the complexity of the products and the huge lock-in effects which they often give rise to, software-procurement is growing into a critical activity. However, due to the phenomena of information overload, finding and making use of the right information when making strategic decisions is becoming increasingly difficult, resulting in the need for organizations to overlook their information processing capacities in order to ensure the quality of such decisions, and consequently, their future survival.
The study revealed that with software becoming increasingly strategic for corporations, and an extensive global shortage of software-development talent, corporations do not have the ability to make the “make-or-buy”-decisions often found in other industries. Additionally, the criticality of software solutions, as even a short downtime of e.g. a software-payment solution can lead to enormous losses, makes it a necessity to ensure the solutions, and the suppliers, are reliable. However, software markets are a jungle with a handful of megavendors dominating most markets and acquiring niche-companies at a raging pace. Furthermore, the solutions themselves are extremely adaptable with multiple dimensions to take into account, which makes weighing them against each other and finding a standardized price an arduous quest. To make things worse, when a solution is chosen it gives rise to enormous lock-in effects, as it usually gets deeply integrated into the company's own software-infrastructure and it takes time to adapt workers to new standards.
For these reasons, software purchasers need to be continuously informed in order to make the best strategic choices for their company and ensure that the supplier's roadmap aligns with the company’s own. However, it can be hard to understand what information is to be processed and to what extent, in order to avoid getting overloaded and none of the insights actually being applied. The study therefore aimed at identifying what information software purchasers need and how it should be communicated within a purchasing department whilst ensuring efficiency.
The findings revealed that purchasers' information needs fall into five broad categories. The first, “The Company”, revealed the importance of understanding the own company needs, its strategic direction, how the solution is being received by the users and the identified current lock-in effect that is being experienced. “The Partnership” focused on the ease of collaboration, the current power-balance between the parties and their overall strategic cooperation. The category of “The Supplier” focused on more basic data and finances, the suppliers innovative capabilities and solution-range, its management and networks and possible scandals to be aware of. “The Market” revealed a need to be aware of the suppliers competitive environment and the overall direction of trends related to the solution, and lastly, “The Macro Environment” revealed the more strategically important needs of being aware of overall software related trends, legislative-geographical risks and the changes in data security-, integrity- and export-legislations.
Conclusively, the findings show the purchaser's position as the strategic manager between buyer and supplier in these critical relations. Software is not going to become less demanding in the near future,
and companies need to cast a light on the importance of nourishing these gatekeepers with their information needs.
Alina Liljeäng & Sofia Frändberg 27/05 2022

• author: Frändberg, Sofia and Liljeäng, Alina
• supervisor: Lars Bengtsson
• organization: Innovation Engineering
• course: INTM01 20221
• year: 2022
• type: H2 - Master's Degree (Two Years)
• subject: Technology and Engineering; Business and Economics
• keywords: Market Intelligence, Software Markets, Software Procurement, Information Processing Theory, Information Requirements.
• language: English
• id: 9101691
• date added to LUP: 2022-10-13 08:29:11
• date last changed: 2022-10-13 08:29:11