How to streamline your procurement process
Aimee Manning | OCT 03, 2022
It’s no secret that the evolution of SaaS has transformed the way organizations select and deploy technology. Gone are the days when procurement teams would send out lengthy RFPs, review the responses, and spend weeks, if not months, evaluating suppliers before presenting their recommendations to internal stakeholders.
Today, the role of procurement is less functional and more strategic.
It’s about identifying opportunities to add value and minimize spend — among other responsibilities, of course.
It’s also about streamlining the entire SaaS procurement process.
The problem, however, is that the sheer volume of software organizations are purchasing today makes procurement an increasingly difficult job. This problem is further fueled by a widespread disconnect in the way software is frequently bought: without the procurement team’s awareness.
Just look at the numbers.
Many organizations have official purchasing policies that involve both procurement and IT.
Yet, according to research, IT teams only purchase 23% of software applications within the average organization. The rest are purchased at either the department level (40%) or by individual employees (37%).
So, what’s the solution? How can you regain control of your SaaS stack and, ultimately, streamline your procurement process?
SaaS procurement challenges
Today, it’s relatively easy for anyone to purchase software. This creates some unique challenges for procurement teams.
As SaaS becomes more accessible, users are more likely to bypass established procurement protocols and obtain the solutions they need themselves. This is known as maverick spending.
There are three main problems with maverick spending:
• It prevents procurement teams from acting on any cost-savings opportunities
• It prevents IT teams from vetting any potential security risks
• It leads to situations where your business is using different tools with the same basic functionalities, resulting in wasted spend and all sorts of operational headaches
Maverick spending is on the rise, believed to account for up to 80% of total spend. Why does this matter? Because maverick spending is causing companies to lose between 10-20% of their targeted savings.
But with procurement teams becoming increasingly tasked with reducing SaaS expenditure, the lack of visibility caused by maverick spending can be detrimental.
Maverick spending can:
• Weaken the purchasing power that procurement typically holds
• Increase the chances of SaaS duplication
• Open the door to poor contract terms
Lack of pricing transparency in the market
Lack of visibility isn’t limited to your SaaS stack. It also extends to the transparency of software pricing.
What do we mean by this?
Unfortunately for SaaS buyers, only 45% of software vendors actually publish their prices online — meaning that the majority keep you in the dark, making the SaaS purchasing process incredibly difficult.
When costs are hidden, the result is both friction and extra work for you as a buyer. You need to scrape through the limited data that’s available in various feature comparison guides. But this data is often fragmented,unreliable, and outdated.
Without pricing transparency, you’re often left with very little insight — and even less leverage — to secure the best possible price and terms in a contract.
Security risks and compliance issues
When department heads or individual employees make software purchases without procurement’s approval or awareness, it not only increases the risk of wasted spend, but also the chances of security and compliance issues.
Ultimately, when shadow IT occurs, organizations are specifically at risk of security and regulatory noncompliance, data leaks and breaches.
But shadow IT is happening, and it’s happening a lot. Research from Gartner found that an average of 30-40% of all enterprise purchases involve shadow IT spending, while research from Everest Group found it to be closer to 50%.
Unexpected software renewals
Without total visibility of your organization’s SaaS stack, it’s simply not possible to know what needs to be renewed and when.
After all, you can’t prepare for something if you don’t know it exists, right?
Unexpected renewals catch procurement teams off guard, in turn sparking major issues. The biggest issue is that auto-renewals often contribute to wasted SaaS spend — you may no longer need a tool, but you haven’t been given enough time to cancel the subscription. Or maybe you don’t need to cancel the subscription, but you miss your window for adjusting your license count and end up paying for too many (or not enough).
How to streamline your SaaS procurement process
Cloud software spending is on the rise, and organizations are investing in more and more SaaS applications.
It’s never been more crucial for businesses to take back control of their operations and streamline the way they acquire new software.
But what does this entail?
Gain full visibility of your SaaS stack
When we think about the challenges of SaaS procurement, a common theme unfolds — a lack of visibility caused by a decentralized buying model.
To do your job, and to do it well, here’s what you need to know:
• What software applications are in use across the business (as well as what applications are not)
• How much these applications are costing the business
• The terms of each contract, including length of termination notice and auto-renewal clauses
•The number of licenses for each application (and cost per license)
• The purposes of each application
• Which teams are using which applications
Only once you have this information, can you start to rationalize your tech stack. This includes identifying and rectifying:
• Duplicate applications that warrant removing unneeded ones
• Overlapping functionalities that warrant adjusting pricing plans
• Tools and licenses that are not in use
• Noncompliant tools and/or usage
Here’s where more is needed to manage your SaaS purchasing in the long run. Identifying your organization’s SaaS stack and creating a system of record are not enough. You also need to track it going forward — something that’s made easier with an automated SaaS purchasing platform.
Standardize and centralize your SaaS procurement process
A decentralized purchasing model is often the root cause of maverick spending and shadow IT. The only path to complete SaaS governance is establishing and maintaining a standard, centralized policy for your SaaS procurement process.
This means taking back control of your SaaS purchasing operations.
The best way to do this?
When you have visibility into your entire SaaS stack and spend from a single place, and have an automated procurement process, you can:
• Keep your costs under control
• Identify opportunities to cut back on spending
• Ensure application compliance
• Track your renewal cycles
• Easily navigate the approvals process
The SaaS procurement process ultimately becomes a seamless workflow requiring minimum input, in turn maximizing business value, eliminating headaches, and freeing up valuable time to focus on more strategic priorities.
This is why so many organizations are now investing in an automated SaaS procurement solution, like Vertice.
Secure the best possible pricing and contract terms
The lack of pricing transparency in the SaaS market poses a substantial challenge for procurement teams.
With SaaS pricing largely driven by vendor sales reps, 90% of buyers end up overpaying for their software applications, by as much as 20-30%.
But this doesn’t have to be the case.
With access to the pricing points and transactions of more than 13,000 SaaS vendors worldwide, we can leverage our data to secure you the best possible deal on all of your contracts. Vertice benchmarks pricing against other companies to ensure you’re always getting the fairest price possible.
Better yet, we can take the burden of buying and renewing SaaS off your hands, saving you a huge amount of both time and money.
Along with guaranteed savings, Vertice can also secure you more favorable contract terms, including increased product support, more flexible duration and termination conditions, SLAs, and auto-renewal clauses.
See for yourself how much we could save you on your next subscription with our free cost savings analysis.