In today's digital world, software is a fundamental tool for businesses to remain competitive and successful. Players that can procure software at minimum cost and risk have a distinct competitive advantage.

While procurement teams are running different activities in parallel, one of the procurement responsibilities is the coordination of sourcing events and ensuring that the software they’re purchasing meets the organization’s specific needs. This mitigates any potential risks while controlling costs.

Below you’ll see some best practices on processes and strategies used by in-house procurement teams to manage their Saas tech stack.

What is the sourcing process?

Procurement teams play a critical role in ensuring smooth business operations during a Source to Contract exercise. This includes i) aligning with leadership teams to ensure that the Saas purchase is in compliance with the company strategy and all approval gates have been passed, and ii) end-users being part of the sourcing process, allowing them to provide input that can contribute to better user adoption down the track.

There is no doubt that poor Sourcing processes expose organizations to effort-intensive negotiations with high risk exposure.

1. Objectives and needs

Procurement teams must work closely with internal stakeholders to identify their specific software requirements (“must have” VS “nice to have”). In collaboration with the Business Units, they assess the organization's needs, user requirements, and compatibility with existing systems. This should prevent working in silos and help them define, with other teams, the criteria for evaluating potential SaaS solutions.

2. Vendor selection

Procurement teams, in collaboration with internal stakeholders, research and evaluate different SaaS vendors based on criteria such as functionality, reliability, security, scalability, pricing, and customer support. They will define a vendor selection strategy and may request proposals or conduct RFP (Request for Proposal) processes to gather information from vendors and compare their offerings.

3. Contract negotiation

Once a suitable vendor is identified and discussed internally,  procurement teams negotiate the terms and conditions of the SaaS contract.

They ensure that the contract includes key provisions related to features need, data security, service-level agreements (SLAs), data ownership, termination clauses, pricing, and any other specific requirements. 

Pro tip: Thinking in terms of Total Cost of Ownership (TCO) is crucial during this step. Remember; cost of the software could represent 50-70% of the TCO. Cost of implementation,  consumption variable cost, and project management cost are some examples of other costs to take into consideration for a holistic picture.

4. Contract management

After the contract is signed, procurement teams oversee the ongoing management of SaaS solutions. They track contract renewals, monitor service delivery against agreed-upon SLAs, and manage any changes or upgrades required. This includes maintaining a centralized repository of contracts and managing vendor relationships.

5. Vendor Relationship Management

In-house teams try to maintain strong relationships with key SaaS vendors in order to maximize value beyond contract. 

They conduct regular vendor reviews, performance monitoring, engage in proactive communication and collaborate on resolving any issues or escalations. This relationship management helps ensure smooth service delivery, effective support, and the ability to leverage vendor expertise.

6. Continuous Evaluation and Optimization: 

Procurement teams regularly assess the performance and value of SaaS solutions. They stay updated with the market trends, new offerings, and emerging technologies. By continuously evaluating and optimizing their SaaS portfolio, procurement teams ensure that the organization's software needs are effectively met.

How do modern SaaS procurement platforms empower in-house procurement teams?

As businesses embrace digital technologies, procurement teams are increasingly turning to modern SaaS procurement platforms to streamline their workflows and improve procurement performance.

Here are 4 ways these platforms enable teams to manage contracts, track spending, and reduce costs.

1. A single source of truth

Modern SaaS procurement platforms provide a centralized repository for all software contracts. This eliminates the need for manual paperwork and enables teams to securely store, manage, and access contracts in one location.

With a centralized repository, procurement teams can reduce risks associated with sensitive information exposure, streamline communication, and improve efficiency.

An organized and updated database of contracts makes it 10x easier to achieve your objectives while building strong relationships with internal stakeholders and vendors.

2. Data-backed pricing benchmarks and vendor insights

Procurement professionals need to determine if current vendor rates align with market rates and if they are getting the best possible pricing.

In-house Procurement teams are often lacking Saas engineering expertise and benchmarkable data. A Modern SaaS procurement platforms will provide insights to collect and analyze data from various sources, allowing teams to better understand pricing benchmarks so they can  make data-driven decisions.

Platforms like Sastrify have benchmarked over $1 billion in SaaS spend, making them a reliable source of vendor insights for procurement teams.

3. Simplified vendor relationship management

Managing vendor relationships can be complex and time-consuming. Lack of methodology often leads to inefficiencies and communication gaps.

SaaS procurement platforms simplify vendor relationship management by streamlining processes and providing actionable insights. 

You can track supplier performance metrics and monitor changes over time to address concerns before they become significant problems.

With a single source of truth, teams can easily access and share data to improve overall efficiency.

4. Unlimited contract negotiation support

Saas contract negotiation is often considered as a tactical activity for Procurement teams; spending time and effort with difficulties to really know the benchmark.

Having Procurement expert supporting you via the platform can give you certainty and confidence of negotiating the best deal possible and secure favorable terms and pricing.

Conclusion

Securing affordable and low-risk access to technology and services remains a significant challenge across industries. Organizations that neglect to equip their teams with the best procurement software will fall behind, as they’re spending as much as 653 hours/year more than they need to on procurement activities.

Armed with a modern SaaS procurement platform like Sastrify, numerous procurement teams worldwide have already experienced substantial performance enhancements and achieved returns on their investments of up to 15X. 

10 Frequently Asked Questions (FAQs) about SaaS Procurement

How does the procurement process work in software purchasing? 

In software purchasing, the procurement process commences with the procurement team identifying the need for specific software. They research potential suppliers and send out a request for proposal (RFP). The role procurement teams play involves evaluating proposals, negotiating supplier contracts, and purchasing and implementing the software. This process is typically guided by a procurement strategy and established company policies and procedures to ensure efficiency and compliance.

What skills are needed by a procurement team when sourcing software? 

Key skills are required by a procurement specialist when sourcing software. These include an understanding of the software market, negotiation skills, knowledge of contract law, project management, and risk analysis. Analytical skills are also crucial to evaluate potential suppliers, and technical skills to comprehend the software specifications. Familiarity with digital technologies is essential too.

How does a procurement strategy impact the purchasing of software? 

A procurement strategy significantly impacts the purchasing of software. It establishes the approach and guidelines that the procurement director and their team follow, influencing which suppliers are considered. The strategy defines the criteria used in the selection process, dictates how negotiations are conducted, and outlines how the software is implemented.

How does budget factor into the procurement process? 

Budget is a vital element in the procurement process. Limited budgets determine the range of software that can be considered and the suppliers that can be engaged. Budget constraints may also influence the negotiation process, leading to trade-offs in terms of software capabilities and services.

What resources do procurement departments utilize in software purchasing? 

Procurement departments utilize various resources in software purchasing. These include procurement technology to streamline processes, databases of potential suppliers, and internal needs assessments. Procurement organizations often rely on expertise from IT and other relevant departments and refer to industry reports, software reviews, and benchmarking data.

How do procurement leaders influence the software purchasing policy? 

Procurement leaders play a key role in shaping the software purchasing policy. This policy outlines the steps to follow in software procurement. Leaders may set the criteria for supplier selection, determine negotiation procedures, establish risk management strategies, and define roles and responsibilities within the procurement team.

What is the role of the procurement team in ensuring compliance during software purchasing? 

The procurement team plays a vital role in ensuring compliance during software purchasing. They ensure that all software purchases comply with internal policies and external regulations. This includes verifying that the software meets security standards, and that contracts are legally sound.

How do legal departments impact the procurement process? 

Legal teams play a significant role in the procurement process. They review contracts to ensure they are legally sound and protect the company's interests. They may also advise on regulatory compliance and help manage legal risks associated with the software purchase.

What is the role of a chief procurement officer in software purchasing? 

In software purchasing, a chief procurement officer oversees the entire procurement process. They make strategic decisions about what software to purchase, which suppliers to engage, and how to manage risks. They ensure the procurement process aligns with the company's overall strategic goals.

How is procurement performance measured in the context of software purchasing? 

In the context of software purchasing, procurement performance can be measured using various metrics. These include procurement cost savings achieved, compliance with purchasing policies, satisfaction of internal stakeholders, and successful implementation and use of the purchased software.

What makes someone a procurement expert in the field of software purchasing? 

A procurement expert in software purchasing possesses a deep understanding of the software market, strong negotiation and relationship management skills, and expertise in contract law and risk management. They should adeptly align procurement decisions with broader business objectives and navigate the complexities of software licensing agreements.

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