Decentralized Procurement of IoT Solutions: Challenges and Best Practices

Decentralized Procurement Issue

In enterprise settings, buyers of traditional IT solutions are well‑known, but when it comes to Internet of Things (IoT) solutions, it is unclear who actually purchases them and how they are sold.

These new solutions occupy a "no‑man’s land" between IT, business units, and operations/service groups. Unlike centralized IT procurement, IoT buying is largely decentralized, with purchasers residing in several internal organizations.

Why IoT Is Valuable to Many Parts of an Organization

If you provide remote sensing and monitoring for industrial washing‑machine manufacturers, the collected data is valuable to after‑sales, product design, and sales & marketing units.

The after‑sales team uses the data to determine when service is needed and to spot early trouble signs. The product design group uses it to improve the next model. Sales and marketing use it to understand which features customers use most, enabling more effective messaging.

Who Actually Purchases IoT Solutions?

Most companies lack a centralized organization, such as an IoT office, to make purchasing decisions for these solutions.

The buyer may be a manufacturing division, a product‑design group, a traditional IT organization of another manufacturer, or an after‑sales service unit. Because there is no central procurement body, solution vendors struggle to locate the "right" buyer, slowing the sales process.

IT and IoT Operate in Different Organizational Domains

To understand why IoT procurement is decentralized, consider a company’s value chain (Figure 1). Small or large firms perform a series of activities that create value for customers, such as producing the products or services customers buy.

Primary activities directly participate in creating and delivering the product or service, including procurement of raw materials, conversion to finished goods, distribution, sales & marketing, and after‑sales support.

Support activities do not directly create value but support the organization and its functions, such as IT, finance, HR, legal, and procurement.

IoT Solutions Directly Involve Primary Activities

In the remote‑sensing example, the manufacturer’s after‑sales team uses data to detect early fault signs, then proactively orders replacement parts and schedules on‑site service calls before the washing‑machine fails.

This predictive, proactive maintenance step directly creates customer value. By contrast, IT may maintain the database that stores customer data or build integrations that connect the data to spare‑part ordering and service‑appointment systems.

Although IoT Is Networked, It Is Not IT

IoT resembles industrial or operational technology rather than information technology. For this reason, IoT occupies a different domain from IT, explaining why its purchasing process is decentralized.

IoT and IT Must Coordinate

Today’s companies involve three distinct organizations—IT, business units, and major value‑creation functions such as operations, manufacturing, marketing, and engineering (Figure 2). The primary buyer will come from one of these groups.

To actually purchase, these organizations must coordinate roles and responsibilities, allocate and transfer budgets, and assign resources. Some negotiations and planning may occur in a structured forum such as a monthly business‑unit‑IT coordination committee or steering committee.

Because IoT management and procurement are decentralized in most companies today, this collaborative buying process is commonplace. While it adds complexity and slows adoption, it also exposes IoT’s value to a broader audience, sparks company‑wide interest, and fuels future buying efforts.

How to Sell IoT – Six Best‑Practice Steps from IoT Vendors

1. Understand Where Your Solution Fits in the Enterprise Value Chain

Whether you sell on‑premise or SaaS‑based IoT solutions, determine the fit of IT and IoT within the specific solution’s context. This helps you identify the primary buyer, secondary buyers, and the roles of IT and various business functions.

2. Engage the Enterprise Digital‑Transformation Office

In a decentralized IoT procurement environment, these offices (if they exist) have visibility and influence over many cross‑functional innovation initiatives that often involve the same functional groups your IoT solution targets. They can save you considerable time and point you in the right direction.

3. Reach Every Function Your Solution Impacts

Each of these organizations is a potential buyer (primary or secondary). In a decentralized buying environment, they must collaborate to pool budgets and resources. Ensure all these groups understand and support your solution.

4. Connect the Buyer’s Dots

Your solution sits between IT, business units, and various operational functions. Buyers will need support and resources to deploy the solution. Help them plan internal collaboration meetings, identify what other teams need (resources, support, budget), and optionally provide interfaces, sample agreements, role definitions, and deliverable lists.

5. Build a Sales Pursuit Plan Around the Decentralized Procurement Process

This is a more complex sales engagement that requires interaction with multiple organizations. Build and plan your resources and support around a longer sales cycle.

6. If You Are a Startup, Help Your Buyer Learn How to Purchase From You

When a startup sells an IoT solution, using traditional enterprise procurement processes is ineffective and only adds risk for the buyer. Assist potential customers in developing new procurement practices for buying from a startup.