Procurement as a Service

What is Procurement as a Service?

Procurement as a Service (PaaS) refers to the outsourcing of procurement activities to a specialized third-party provider. These providers can manage all or part of an organization’s procurement function, with some handling processes such as intake-to-procure, while others cover the full intake-to-pay cycle.

Typically, though, Procurement as a Service companies can handle:

• Supplier sourcing and selection
• Contract negotiations
• Contract management
• Spend analysis and reporting
• Risk and compliance monitoring
• Technology integration

With procurement teams under increasing pressure to reduce spend, increase operational efficiency, and drive strategic value, the Procurement as a Service sector is unsurprisingly booming – with the industry expected to grow 11.1% by 2030.

The benefits of investing in Procurement as a Service

While there are ample reasons why so many companies are opting to partner with a Procurement as a Service company, some of the key benefits include:

• Cost-saving opportunities

Virtually every organization is sitting on untapped savings potential, often hidden within fragmented purchasing, unmanaged tail spend – or long-tail spend – and vendor agreements that haven’t been benchmarked, renegotiated, or right-sized.

As organizations grow, this problem only amplifies.

In fact, unused and underutilized software licenses alone are responsible for – in many cases – millions of dollars being wasted annually by individual organizations.

The right outsourced procurement provider will not only pinpoint and recover these savings opportunities, but they will also ensure that every contract going forward is optimized to align with your current and future needs.

By leveraging benchmarking data, their own negotiation expertise, and real-time market knowledge, Procurement as a Service providers are able to secure the very best terms and pricing on all of your contracts.

‍Take a look at how Piano was able to save more than $100,000 on a single contract with Vertice.

• Time savings

As companies look to achieve more with less, procurement teams are under immense pressure to drive greater value across the business. This involves moving beyond just tactical purchasing towards more strategic initiatives – managing risk, ensuring compliance, improving supplier diversity, optimizing contracts, and achieving cost control.

But while expectations are rising, resources often aren’t.

As a result, many teams simply aren’t able to prioritize these initiatives, as their time is consumed by manual processes and the administrative burden associated with contract management and negotiations.

Even then, there’s rarely enough time to focus on getting maximum value from every contract being subscribed to – for software alone, the average organization uses 132 applications, a figure that is growing by 11% each year.

Outsourcing all or part of the procurement function is one way to relieve this pressure – giving teams the hours back in their day to focus on driving strategic outcomes, strengthening supplier relationships, and uncovering hidden opportunities for savings and innovation.

See for yourself how tech talent software company, A.Team, saved 115 hours on negotiations in just three months by partnering with Vertice.

• Negotiation expertise

When you make the decision to outsource all or parts of your procurement function to a dedicated provider, you are handing the reins to specialists who live and breathe procurement.

From streamlining internal processes to managing vendor negotiations and contracts, Procurement as a Service companies are equipped to drive efficiency, reduce risk, and unlock value across the entire procurement lifecycle.

Beyond price savings, these companies can also help you navigate complex contract clauses and secure more favorable terms.

With unparalleled industry knowledge, Procurement as a Service providers also understand the hidden costs associated with each vendor, along with the less obvious opportunities for savings, for example, the pricing models that aren’t publicly advertised.

• Faster procurement cycles

Outsourced procurement offers a significant advantage in accelerating procurement cycles, enabling organizations to acquire goods and services far more quickly and efficiently.

By utilizing advanced procurement software, providers can streamline intake management, automate approval workflows, and track and manage renewals. This not only reduces manual intervention and eliminates the subsequent delays, but it also helps to improve visibility throughout the entire procurement process.

See for yourself how Le Collectionist was able to accelerate their procurement cycles by as much as 55% with Vertice.

• Greater compliance

Procurement as a Service solutions can help to drive greater compliance with internal procurement policies, regulatory requirements, and contractual obligations. By standardizing procurement workflows and introducing approval controls and audit trails, these platforms help to reduce the risk of maverick spending, shadow IT, and potential contractual risks.

Why procurement as a service isn’t replacing procurement teams

Procurement as a Service solutions aren’t designed to replace internal procurement teams, but rather enhance their capabilities and efficiency.

By providing flexible and scalable support, procurement software as a service providers such as Vertice act as strategic partners, bringing in specialized skills, advanced technologies, and market intelligence that internal teams don’t necessarily have.

The bottom line is, by leveraging the expertise and infrastructure that these solutions provide, organizations can optimize their procurement functions, streamline processes, and make far more informed purchasing decisions – all without sacrificing control or visibility.

Common use cases for procurement software as a service

The fact that the procurement as a service sector is growing speaks volumes about the number of companies turning to third-party providers to support their procurement initiatives, control rising costs, and improve process efficiency.

Some of the specific use cases for procurement software delivered as a service include:

Managing rising software costs

Not only does SaaS now account for 12.5% of total organizational spending, but software prices are also rising at a rate of 11% annually – significantly outpacing general market inflation.

This rapid increase, combined with expanding tech stacks, fragmented purchasing processes, and auto-renewal traps, makes it increasingly difficult for organizations to maintain visibility and control over their software budgets.

Procurement Software as a Service providers help mitigate the impact by centralizing software purchasing, tracking license utilization, keeping track of renewals, identifying redundancies, and negotiating the best possible terms and pricing on any contract.

See how one company achieved average software savings of 32% by partnering with Vertice, along with an 800% return on their investment.

Tail Spend Management

With procurement teams under immense time-constraints, the lower-value goods and services procured across an organization often fall through the cracks. The problem is, these overlooked purchases – referred to as tail spend – can quietly accumulate into a significant portion of a company’s total procurement costs.

Procurement as a Service solutions provide teams with the tools and expertise to regain control of this tail spend. In addition to offering much-needed visibility, they can also:

• Identify duplicate tools and subscriptions that can be consolidated
• Pinpoint applications and services that are unused or underutilized
• Renegotiate contracts for improved terms and cost savings
• Optimize regular purchases such as office supplies, by leveraging volume discounts and preferred vendor agreements
• Centralize all purchases, regardless of value, to reduce maverick spending

By outsourcing the management of this tail spend, companies ultimately benefit from greater cost savings, reduced procurement risk, and increased operational efficiency – freeing internal teams to focus on more strategic initiatives.

M&A procurement integration

Following mergers and acquisitions, the process of aligning procurement functions is both complex and time-sensitive. To support this critical phase, Procurement Software as a Service providers play a key role in accelerating integration and unlocking value across the newly combined organization.

They specifically help by:

• Conducting a thorough spend analysis to uncover areas of duplication and inefficiencies
• Consolidating contracts
• Rationalizing the supplier base to eliminate redundancies and negotiate more favourable agreements – leveraging pricing intel and economies of scale
• Advising on vendor sourcing using peer benchmarking data and market expertise
• Aligning procurement policies, tools and systems for smoother integration

Evaluating procurement as a service providers

As with any business process outsourcing (BPO) solution, there are a number of different procurement-as-a-service companies on the market. Taking the time to evaluate your options is key to choosing the right provider.

With this in mind, here are some of the key factors you should be considering:

• The platform’s capabilities – The right procurement as a service solution will go beyond handling negotiations on your behalf, it should also offer robust technology for streamlining procurement processes, optimizing spend, and managing indirect procurement contracts. When evaluating potential providers, assess the full breadth of their capabilities across procurement and spend management. It’s also important to determine how flexible and customizable their workflows are, to ensure the platform can scale with your company’s growth and evolving needs.
• The quality of their data – The quality and depth of a provider’s benchmarking data is important as it supports purchasing decisions, provides leverage in negotiations, and ensures you’re getting the best value from your contracts. Ideally, partner with a company that provides tailored benchmarking data that is customized to your unique needs and circumstances, as opposed to generic, out-of-the-box intel.
• Whether negotiations are included – Not all procurement as a service providers offer negotiation support as part of their core offering, so it’s important to clarify this early on. In our experience, those that do tend to deliver better outcomes.
• Whether they offer savings guarantees – If you’re trusting a third-party provider to handle part of your procurement function, particularly negotiations, you want reassurance that they deliver a clear return on investment – specifically in the form of cost savings. One way to gain that confidence is by assessing whether the provider offers a savings guarantee, as this can show that they’re committed to delivering measurable value.
• Whether or not they are acting as resellers – Procurement service providers that act as resellers may introduce concerns around pricing transparency and vendor impartiality. In some cases, this model can create conflicts of interest, with providers incentivized to promote certain vendors. Be sure to understand the provider’s business model and whether their role is that of an impartial negotiator or a middleman.
• Whether you will be assigned a dedicated buyer – It’s worth being aware that some companies will assign customers with a dedicated purchasing manager, whereas others will rotate them depending on the tool being negotiated. In our experience, this latter option often creates friction, with the customers having to deal with multiple contacts. What’s more, it typically doesn’t drive the best outcomes.

How Vertice can help you drive strategic value

As a procurement orchestration platform, Vertice not only has the capabilities to optimize your procurement spend and streamline your processes for maximum efficiencies, but we can also handle negotiations on your behalf, leveraging our extensive benchmarking database to ensure the very best deal on any contract.

By partnering with Vertice, you ultimately gain the hours back in your day to focus on more strategic initiatives, leaving us to handle the rest, while retaining full oversight of your outsourced procurement processes and contracts.

See for yourself how we helped one company save 115 hours on contract negotiations in the space of a few months, or how we saved another $155,000 on a single contract through our white glove service.

Alternatively, take a self-guided tour of our platform to get a better idea of how we can help you simplify your procurement efforts.