Why most Australian organisations are overspending on ICT and don’t realise it

ICT overspend rarely shows up as a single bad decision. It shows up years later, buried inside contracts, renewals and services no one remembers actively choosing.

Over time, those decisions turn into operating arrangements that feel immovable, even though the business itself has changed materially.

This pattern shows up repeatedly across ICT procurement, technology sourcing and vendor management, particularly in organisations across Australia that have grown, merged or diversified over time.

The problem usually starts before pricing is even discussed

A common issue in ICT procurement is treating all sourcing decisions the same way.

In practice, organisations often apply a single sourcing approach regardless of:

• contract value
• commercial risk
• strategic importance
• whether internal expertise is actually available at the time

This is where cost and risk start to creep in.

Business size and strategy should dictate how ICT sourcing is approached. Some organisations have strong internal subject matter expertise and the time to apply it properly. Others don’t, or don’t have that expertise available when a decision needs to be made.

In those situations, pushing everything through internally often costs more than bringing in external support to get the commercial structure right the first time.

There isn’t one correct model. There are, however, principles that consistently hold up.

Effort should match the size and risk of the decision

Not every ICT sourcing activity deserves the same level of scrutiny.

As a general rule:

• higher value and higher risk decisions need more effort
• lower value, low-risk decisions can be handled more pragmatically

Problems arise when this is ignored.

It’s common to see low-value purchases dragged through months of process while materially larger and riskier decisions are rushed because they feel urgent. That imbalance usually shows up later, once the contract is already signed and the issues are harder to unwind.

Simple internal rules help here. For example:

• requiring more than two quotes or market benchmarking for sourcing exercises above a defined threshold, such as $50k
• escalating higher-risk ICT decisions for broader commercial review, even if the spend itself doesn’t initially look large

These rules don’t slow organisations down. They reduce the number of contracts that have to be reopened once problems surface.

Skipping alignment early almost always costs more later

ICT procurement decisions don’t sit neatly in one function.

In practice, they cut across IT, Corporate Services, People & Culture, Marketing, Operations and most parts of the business. When alignment across these groups is skipped or deferred, the consequences are rarely subtle. They tend to show up as solutions that technically work but don’t fit the commercial model, contracts legal teams are uncomfortable with once it’s too late to change them, and pricing structures finance struggles to forecast or control.

Taking time upfront to align on requirements, constraints and commercial assumptions often feels slow. Fixing the wrong solution after it’s embedded takes far more time and effort than validating the right one before committing.

Urgency should lead to short-term deals, not long-term lock-in

Urgency is unavoidable in ICT. Systems fail, contracts expire and operational pressure doesn’t wait for perfect process.

The mistake is letting urgency dictate long-term commitments.

In genuinely urgent situations, a better approach is often to:

• put a short-term or interim arrangement in place
• stabilise the situation
• then step back and design a proper sourcing strategy for the medium to long term

This avoids signing multi-year ICT contracts before there is confidence that the solution is the right one.

Confidence is what allows organisations to secure better terms

Confidence in the selected solution has a direct impact on commercial outcomes.

When organisations are confident they’ve chosen the right solution, they are more willing to:

• commit to longer contract terms
• structure agreements more efficiently
• negotiate harder on pricing and conditions

When there is doubt, contracts tend to be shorter, more expensive and more flexible in ways that benefit the vendor rather than the customer.

For example, confidence in a selected printer fleet allows an organisation to lock in a five-year monthly lease and materially reduce operating costs. When there is uncertainty, organisations hedge with shorter terms and higher pricing, which almost always costs more over time.

That hesitation usually shows up later through shorter terms, higher pricing and fewer options at renewal.

Vendor sprawl is an easy way to overspend without noticing

Another common contributor to ICT overspend is unnecessary vendor sprawl.

In organisations where departments operate in silos, it’s common to find:

• different teams paying for similar services
• overlapping tools solving the same problem
• no consolidated view of total ICT spend across a category

This is particularly common in IT procurement, where purchasing decisions are decentralised and evolve incrementally.

Consolidation is often one of the simplest ways to reduce cost and complexity, but it rarely happens unless someone deliberately steps back and looks across the whole picture.

In ICT, basic audits are often missing and money leaks as a result

Some of the most reliable savings in ICT come from basic operational audits that never occur.

Common examples include:

• mobile services for devices no longer in use
• plans that no longer match actual usage
• licences assigned to users who have moved roles or left the business

In practice, these costs persist because nothing ever forces a proper review once services are live.

Without the right expertise or available time internally, this information stays hidden. In those cases, outsourcing an audit is often far cheaper than continuing to pay for services that deliver no value.

Contracts are where many long-term ICT costs are locked in

Even when headline pricing looks reasonable, ICT contracts often contain mechanisms that quietly increase cost over time.

Examples include:

• annual indexation clauses that compound year after year
• auto-renewal provisions and notice periods that go unnoticed
• financing or interest charges embedded in payment terms
• change fees triggered by routine operational adjustments

These terms are rarely obvious once the contract is live. By the time they become visible, leverage has usually already been lost.

This is why understanding contract mechanics before signing matters far more than chasing savings at renewal.

When it’s worth taking a closer look

Not every organisation is overspending, and not every contract needs to be revisited.

It is usually worth taking a closer look when:

• the business has grown or changed materially since key ICT decisions were made
• contracts were signed under time pressure
• spend feels fixed without a clear explanation
• there is lingering doubt about whether current solutions are the right ones

For organisations in Australia engaging external ICT procurement or technology sourcing support, the biggest gains usually come from reviewing contract structures, supplier consolidation opportunities and sourcing approaches before renewal pressure hits.

A short clarity discussion can usually confirm whether meaningful value exists, or whether current arrangements are already fit for purpose.

Either way, it gives decision-makers clarity before more time and money are committed.

Start with a clarity call: https://itprocurementservices.com.au/