SaaS Management

  • 12 min read

SaaS Procurement: The Right Way To Procure SaaS in 2024

Sreenidhe S.P

28th December, 2023

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Are you currently employing conventional methods for SaaS procurement? As an IT procurement manager, you're likely well-acquainted with the arduous paperwork inherent in traditional software acquisitions. It's probable that your SaaS purchasing process is sluggish and lacking efficiency. However, a superior approach to managing SaaS procurement exists, particularly beneficial for organizations dependent on numerous software tools.

As a leader in procurement, adopting a structured approach is pivotal for successful SaaS app acquisition. This begins with a comprehensive understanding of your software requirements, exploring available options, selecting the most suitable tools, and securing optimal pricing. Additionally, prioritizing aspects like security measures, contract negotiations, and terms and vigilantly managing renewals are crucial.

Previously, considerable time was spent scouring information to enhance SaaS deals, yet relying on outdated purchasing methods often resulted in both time and monetary losses. Shockingly, according to Vertice, a staggering 90% of SaaS buyers end up overpaying.

To secure better deals, your procurement team requires an intelligent strategy for SaaS procurement. This strategy guarantees that software is procured at the right cost, ensuring a favorable return on investment (ROI) while curbing unnecessary expenditures.

This article delves deep into the realm of SaaS procurement, furnishing your procurement team with a definitive roadmap to navigate. Let's embark on your journey towards smarter SaaS procurement!

What is SaaS procurement?

SaaS procurement refers to the systematic approach of choosing, obtaining, and overseeing SaaS (Software as a Service) solutions tailored for your organization. It encompasses recognizing the necessity for SaaS, assessing various vendors offering such solutions, engaging in contract negotiations, and overseeing the implementation and management of the selected solution.

For instance, consider a scenario where your company experiences rapid growth, revealing inadequacies in your current project management tools. Following discussions with project managers and team leaders, it becomes evident that enhanced project management software is imperative to meet organizational demands. Consequently, all relevant departments, including your procurement department, agree to acquire a suitable project management tool.

Upon the decision to procure the new project management tool, your procurement team begins exploring diverse options, engaging in discussions regarding costs and terms with potential SaaS providers, and ultimately subscribing to the chosen software. This decision-making process often necessitates involvement and approval from various departments within your organization, such as IT, finance, and legal teams.

What’s The Difference Between Procurement and Purchasing?

"Procurement" and "purchasing" are two terms often used interchangeably, but they represent different aspects of the acquisition process within an organization.

Procurement encompasses the broader process of acquiring goods or services. It involves activities like sourcing, negotiating contracts, selecting vendors, establishing terms and conditions, and managing supplier relationships. Procurement extends beyond just the act of buying and involves strategic planning to ensure that the organization acquires the right goods or services at the best value.

For instance, your role in procurement would mean assessing the company's IT needs, like software licenses or cloud services. You'd research different providers, negotiate contracts with them, and maintain strong ties to ensure they meet your needs effectively.

On the other hand, purchasing is a specific subset of the procurement process. It refers to the transactional aspect of acquiring goods or services. Purchasing involves the actual buying of goods or services from chosen vendors based on predefined terms and conditions, such as price, quantity, and delivery terms. It's more focused on the execution of acquiring the required items.

For example, in your role as the IT procurement manager, purchasing would entail placing orders for a specific number of laptops or software licenses from the chosen supplier. It's the concrete action of buying the items you've already identified through the procurement process.

In summary, procurement encompasses the entire process of acquiring goods or services, including strategic planning and relationship management, while purchasing is specifically about the transactional act of buying based on predefined criteria.

What Are The Potential Benefits of SaaS Procurement?

SaaS procurement offers several advantages to organizations seeking software solutions:

• Scalability: SaaS solutions often allow for flexible scaling, enabling businesses to easily adjust resources, features, and capacity as needed. This scalability is particularly beneficial for growing companies or those experiencing fluctuating demands.

• Cost Efficiency: SaaS often operates on a subscription-based model, reducing upfront costs associated with traditional software purchases. It typically involves lower initial investment and predictable recurring payments and eliminates the need for in-house infrastructure maintenance, resulting in cost savings.

• Accessibility and Updates: SaaS applications are accessible from any location with internet access, promoting remote work and collaboration. Additionally, the provider manages updates and maintenance, ensuring that users always have access to the latest features and security patches without any additional effort from the organization.

• Rapid Implementation: SaaS solutions generally have quicker deployment times compared to on-premises software. This allows organizations to swiftly integrate new tools into their operations, enabling faster adoption and time-to-value.

• Scalable Security Measures: Reputable SaaS providers invest heavily in security measures, offering robust protection against cyber threats. They often implement industry-standard security protocols, encryption, and regular audits, providing a higher level of security than many organizations could achieve independently.

• Streamlined Procurement Process: SaaS procurement can simplify the purchasing process. It often involves straightforward subscription-based models, reducing complex negotiations and minimizing the burden of hardware/software compatibility issues.

• Focus on Core Business: By outsourcing software management to SaaS providers, organizations can focus on their core business activities rather than dedicating resources to software development, maintenance, and updates.

• Data Insights and Analytics: Many SaaS solutions offer built-in analytics and reporting tools, providing valuable insights into operations, user behavior, and performance metrics that can drive informed decision-making.

SaaS procurement offers flexibility, cost savings, enhanced security, and streamlined operations, making it an attractive choice for many modern businesses.

Effective Strategies for SaaS Procurement

Effective SaaS procurement strategies can streamline the acquisition process and ensure optimal utilization of software tools. Here are some strategies:

1. Needs Assessment:

• Requirement Analysis: Begin by thoroughly understanding the organization's requirements. Identify the specific functionalities, features, and tools required to meet your business objectives.

• User Input: Involve end-users in the decision-making process. Gathering feedback from departments utilizing the SaaS tools ensures alignment with their needs.

2. Vendor Evaluation:

• Market Research: Conduct comprehensive market research to identify potential vendors. Evaluate their offerings, including features, support, scalability, and pricing structures.

• Vendor Reputation: Assess vendor reputation, reliability, security measures, compliance adherence, and customer reviews to ensure credibility.

3. Negotiation and Contracts:

• Pricing Structure: Negotiate pricing models that align with your organization's budget and future growth plans. Consider subscription-based models, volume discounts, or pay-as-you-go options.

• Service Level Agreements (SLAs): Clearly define SLAs concerning uptime, support, security, and data privacy. Ensure these agreements align with your organization's expectations.

4. Data Security and Compliance:

• Compliance Standards: Verify that the SaaS tool complies with industry standards (such as GDPR and HIPAA) and specific data protection laws relevant to your operations.

• Data Security: Prioritize tools with robust security measures, including encryption, access controls, and data backup capabilities.

5. Scalability and Integration:

• Scalability: Opt for tools that can scale as your organization grows, offering additional features without significant cost implications.

• Integration Capabilities: Assess how easily the tool integrates with your existing systems, ensuring seamless data flow and interoperability.

6. User Adoption and Training:

• User-Friendly Interface: Choose tools with intuitive interfaces and user-friendly experiences. A simpler interface fosters better adoption rates among employees.

• Training Programs: Implement comprehensive training programs to familiarize users with the tool's functionalities and encourage effective utilization.

7. Performance Tracking and Optimization:

• Analytics and Metrics: Select tools that offer performance metrics and analytics to track usage, efficiency, and ROI.

• Regular Assessments: Conduct periodic reviews to optimize usage, identify underutilized or unused licenses, and reallocate resources as needed.

8. Renewals and Termination Protocols:

• Renewal Review: Establish protocols for timely renewal assessments, ensuring the tool's continued relevance and alignment with evolving business needs.

• Termination Clauses: Ensure clear terms for termination to avoid unnecessary costs or lock-ins. Verify exit strategies and data portability options.

9. Post-Implementation Support:

• Vendor Support: Evaluate the vendor's post-implementation support services, including responsiveness, technical assistance, and issue resolution.

• Feedback Mechanisms: Create channels for ongoing user feedback to address concerns, improve functionality, and update features based on user input.

8. Continuous Improvement:

• Feedback Loops: Encourage a culture of continuous feedback to refine the procurement process and address user needs promptly.

• Benchmarking: Regularly benchmark your chosen SaaS tools against market alternatives to ensure they remain competitive and aligned with evolving industry standards.

Adopting these strategies ensures a comprehensive approach to SaaS procurement, facilitating informed decision-making, efficient resource allocation, and optimized utilization of software tools within your organization.

The Ideal SaaS Procurement Checklist

Crafting an ideal SaaS procurement checklist involves several key components:

• Needs Assessment:

• Define specific organizational needs and objectives for the SaaS solution.

• Identify key stakeholders and departments involved in the procurement process.

• Security and Compliance Criteria:

• Establish non-negotiable security and compliance standards that any potential SaaS solution must meet.

• Ensure alignment with industry regulations and internal policies.

• Budget and Cost Analysis:

• Determine the allocated budget and evaluate the cost-effectiveness of potential solutions.

• Consider long-term expenses, including scalability and additional features.

• Vendor Evaluation:

• Research and assess various SaaS vendors based on functionality, reputation, scalability, support, and security measures.

• Check vendor track records, customer reviews, and references.

• Contract and Legal Review:

• Engage legal and procurement teams to review contracts thoroughly.

• Ensure clarity on terms, service level agreements (SLAs), data ownership, exit strategies, and compliance.

• Pilot Testing and Trials:

• Implement pilot programs or trials with shortlisted vendors to evaluate functionalities, user experience, and compatibility.

• Gather feedback from relevant departments and end-users.

• Integration and Compatibility:

• Assess the ease of integration with existing systems and workflows.

• Verify compatibility with other tools or platforms used within the organization.

• Training and Implementation Plan:

• Develop a comprehensive plan for implementation, data migration, and user training.

• Ensure seamless adoption across the organization.

• Monitoring and Performance Metrics:

• Establish key performance indicators (KPIs) and metrics to evaluate the success of the SaaS solution.

• Implement systems to continuously monitor performance and user satisfaction.

• Renewal and Exit Strategy:

• Define procedures for renewal, negotiation, and potential termination of contracts.

• Outline exit strategies to ensure a smooth transition if switching vendors becomes necessary.

• Vendor Relationship Management:

• Foster a strong relationship with the chosen vendor for ongoing support, updates, and potential customization.

• Establish communication channels for issue resolution and regular reviews.

Tailoring this checklist to fit your organization's specific needs and processes ensures a structured and effective approach to SaaS procurement, enabling informed decision-making and successful implementation.

SaaS Procurement Process: A Strategic Roadmap to Streamline Your SaaS Procurement

The SaaS procurement cycle involves 7 steps requiring coordination among different departments and meticulous documentation. This process often demands substantial effort and time due to its multi-stage nature and the need for multiple validations and approvals.

Organizations often seek to implement more efficient and automated procurement systems or software to streamline and expedite this process. Here are some strategies that can help mitigate the tediousness and improve the efficiency of SaaS procurement:

1. Automated Request and Approval Systems: Implement systems that allow employees to submit software requests digitally, reducing paperwork and accelerating the initiation of the procurement process.

2. Centralized Vendor Database: Maintain a comprehensive database of pre-approved vendors to expedite the shortlisting process, reducing the time spent on vendor research.

3. Electronic RFP/RFQ Processes: Utilizing electronic systems to request quotes and proposals from vendors allows quicker responses and easier comparison of offers.

4. Contract Management Software: Implement contract management software that automates contract negotiation process, standardizes terms, and expedites legal review processes.

5. Automated 3-Way Match: Utilize software systems that automate the reconciliation process between purchase orders, receipts, and vendor invoices, reducing the manual effort required.

6. Integration of Finance and Procurement Systems: Integrate finance and procurement systems to streamline payment processing and record-keeping, ensuring smoother transaction handling.

7. Employee Training and Self-Service Tools: Provide training and self-service tools for employees to understand procurement procedures better and submit requests efficiently.

By leveraging technology and implementing streamlined processes, organizations can significantly reduce the time and effort involved in SaaS procurement while improving accuracy and compliance. Automation and standardized procedures can enhance efficiency, reduce errors, and enable better collaboration among different departments involved in the procurement cycle. 

The Shift in the SaaS Procurement Process

The shift in SaaS procurement has brought about significant changes in the buying landscape within organizations. Previously, the IT procurement team held the reins, employing standardized evaluation criteria to ensure software purchase compatibility, suitability, and affordability.

However, the advent of SaaS has democratized the buying process. Employees with access to departmental budgets or company credit cards can independently procure SaaS applications without the IT department's oversight. This phenomenon, termed "shadow IT," poses challenges in terms of visibility, control, and adherence to organizational standards.

Organizations require a contemporary SaaS procurement solution to address this modern-day procurement challenge that accommodates this decentralized buying behavior while maintaining governance and standards. An ideal modern SaaS procurement solution might include:

1. Centralized Oversight: Implement a centralized platform that allows visibility into all SaaS applications being used across the organization. This provides IT departments with insights into shadow IT and ensures better control.

2. Self-Service Procurement Portals: Offer user-friendly portals or platforms where employees can request new SaaS applications within defined parameters and approval workflows set by IT or procurement teams.

3. Standardized Evaluation Framework: Provide guidelines and templates for employees to evaluate SaaS solutions based on predefined criteria. This empowers employees to make informed decisions while aligning with organizational needs and standards.

4. Integration Capabilities: Ensure compatibility and integration of newly acquired SaaS applications with existing systems, promoting seamless workflows and data security.

5. Education and Awareness: Conduct regular training sessions to educate employees about the risks of shadow IT and the importance of adhering to organizational standards for SaaS procurement.

6. Policy and Compliance Management: Establish clear policies regarding SaaS procurement, including compliance with security, data privacy, and regulatory standards. Regular audits can ensure adherence.

Adapting to this new landscape requires a shift in strategy, focusing on empowering employees while maintaining control and adherence to organizational standards. A modern SaaS procurement solution should strike a balance between flexibility and governance to meet evolving business requirements.

Why Do You Need A SaaS Procurement Platform?

A SaaS procurement platform serves as a crucial tool for organizations due to several compelling reasons:

1. Centralized Control and Visibility: A procurement platform provides a centralized hub to oversee all SaaS purchases within an organization. It offers visibility into what software is being used, who is using it, and how much is being spent, enabling better control and management of software assets.

2. Mitigation of Shadow IT: By offering a structured channel for employees to request and procure SaaS applications within defined parameters, a procurement platform helps reduce the prevalence of shadow IT. It allows employees to acquire tools while ensuring compliance with organizational standards and policies.

3. Standardization and Compliance: A procurement platform often comes with predefined evaluation criteria and standardized processes for vetting and approving SaaS applications. This ensures that purchased software aligns with organizational needs, integrates seamlessly, and complies with security and regulatory standards.

4. Streamlined Procurement Workflow: Such platforms streamline the procurement process by automating workflows, from requisition to approval, purchase, and deployment. This automation reduces manual effort, accelerates decision-making, and minimizes errors in the procurement cycle.

5. Cost Management and Optimization: A procurement platform assists in managing costs by providing insights into software spending, facilitating budget allocation, and identifying opportunities for cost optimization. It helps negotiate better terms with vendors and eliminate redundant or underutilized software subscriptions.

6. Vendor Relationship Management: These platforms often facilitate vendor management by offering tools to track vendor performance, contract renewal dates, and service-level agreements. This ensures effective communication and collaboration with vendors for improved services.

7. Data-driven Decision-making: Through analytics and reporting features, a procurement platform offers valuable insights into software usage, user preferences, and performance metrics. This data enables informed decision-making for future software investments and optimizations.

8. Scalability and Flexibility: SaaS procurement platforms are often scalable and adaptable to an organization's evolving needs. They accommodate growth, changing requirements, and the integration of new technologies seamlessly.

In essence, a SaaS procurement management platform not only brings structure and efficiency to the acquisition of software but also ensures alignment with organizational goals, enhances control and optimizes spending while fostering a culture of compliance and informed decision-making.

Elevating SaaS Procurement with Zluri's Suite of Features

Zluri is an innovative solution in the realm of SaaS procurement that offers several features aimed at streamlining and optimizing the process:

1. Holistic Vendor and Application Discovery

Zluri's expansive repository of SaaS applications simplifies the exhaustive task of vendor and application discovery. It offers a consolidated view, allowing procurement teams to explore a diverse range of vendors and applications tailored to specific business needs. This comprehensive database provides a strong foundation for informed decision-making.

2. Informed Vendor and Application Evaluation

Zluri empowers procurement managers with rich insights and analytics, enabling thorough evaluations of potential vendors and their offerings. It facilitates side-by-side vendor comparisons based on critical parameters such as pricing models, feature sets, user reviews, and compliance adherence. This aids in selecting the most suitable solutions aligned with business objectives.

3. Smart Cost Optimization Strategies

With Zluri's monitoring capabilities, businesses gain a keen understanding of their SaaS expenses. The platform identifies underutilized licenses and redundant applications, providing actionable insights for cost optimization. Zluri assists in prudent spending and resource allocation by tracking usage patterns and evaluating subscription efficiency.

4. Compliance and Security Assurance

Zluri acts as a vigilant guardian of compliance and security standards. It conducts comprehensive checks to ensure adherence to industry-specific regulations and data privacy standards. By evaluating the security measures implemented by SaaS applications, Zluri helps mitigate potential compliance risks and fortify data protection measures.

5. Seamless Procurement Workflow

The platform simplifies and streamlines the entire SaaS procurement lifecycle. It automates tasks such as monitoring upcoming renewals and tracking contract terms. Additionally, Zluri offers critical insights into vendor performance and contract details, facilitating smooth procurement processes and fostering stronger vendor relationships.

6. Robust Usage and Performance Monitoring

Zluri's advanced analytics provide deep insights into application usage patterns and performance metrics. These analytics aid in assessing user engagement and application effectiveness and identifying potential areas for optimization. This information fuels strategic decision-making for maximizing ROI on SaaS investments.

7. User Management and Effortless Onboarding

Efficient user management is a cornerstone of Zluri's functionality. It facilitates smooth onboarding processes, manages user access and permissions, and ensures compliance with user-level requirements. Zluri's insights into user adoption rates enhance training strategies, optimizing application utilization across the organization.

8. Customizable Dashboards and Detailed Reporting

Zluri's customizable dashboards and reporting tools cater to specific organizational needs. Users can generate comprehensive reports, extracting granular details for better visibility and informed decision-making. These insights enable proactive management strategies aligned with organizational objectives.

9. Integration Compatibility and Scalable Solutions

Zluri's integration capabilities ensure seamless compatibility with existing IT ecosystems. This integration-friendly approach aids in evaluating the scalability and interoperability of SaaS applications, preparing businesses for future growth without compromising operational efficiency.

Zluri's comprehensive suite of features simplifies SaaS procurement and serves as a strategic enabler, empowering businesses to make informed decisions, optimize costs, fortify security, and streamline SaaS management for sustained growth and success.

So, what to wait for? Let us be your trusted partner in SaaS procurement, making your job easier and your budget happier. Book a demo with us today!

FAQs

What are the key considerations in selecting SaaS procurement options?

Below are the factors that help in the evaluation process, facilitating more informed decision-making in choosing procurement SaaS vendors or companies.

• Understanding Business Needs

• Certification, Compliance, and Standardization

• Technology and Platform

• Service Deployment Roadmap

• Data Governance and Management

What are the main categories of procurement?

In the procurement process, various categorizations can be applied to streamline the process. Companies often differentiate between direct and indirect procurement based on the intended use of the acquired items. Another classification revolves around goods or services procurement, depending on the nature of the items under consideration.

What are the common SaaS procurement mistakes?

Below mentioned are a few common SaaS procurement mistakes.

• Skipping the Comparison Game

  • Opting for SaaS without exploring the market and thorough research

• Succumbing to Time Crunch

  • Making software procurement decisions under time pressure

• Overlooking Contract Nuances

  • Ignoring long-term contract considerations that could impact your business

• Unaware of Internal Lead-Times

  • Failing to understand your organization's internal lead times for seamless integration

• Too Many Cooks Spoil the Broth

  • Involving an excessive number of approvers in the decision-making process

• Deal-Approval Mismatch

  • Agreeing to a SaaS deal without having proper approvals in place

• The Perils of Wrong Contract Terms

  • Selecting inappropriate contract terms that may not align with your business goals

What is an e-procurement SaaS app?

Revolutionize your organization's procurement cycle with cutting-edge e-procurement software—a robust enterprise system designed to seamlessly automate and integrate every facet of your procurement workflow. Elevating your operational efficiency as a top-tier SaaS e-procurement enhances transparency in both spending and approval processes, ensuring a streamlined and optimized procurement experience.

What is software procurement?

Empower your enterprise with cutting-edge procurement software, a sophisticated business solution designed to automate the entire procure to pay SaaS cycle. From meticulously analyzing and managing expenditures to seamlessly handling contracts and facilitating invoice payments, our platform provides users with comprehensive control over every facet of the procurement process.

About the author

Sreenidhe S.P

Sreenidhe is a SaaS management expert and has a keen interest in ITAM and SAM practices. She is adept when it comes to SaaS Vendor Management and SaaS Spend management. Her knowledge of SaaS and SaaS management is self-thought and is based on a lot of reading. Before joining Zluri, Sreenidhe was working as a full-time journalist. She is also equally passionate about fashion and aspires to own a boutique someday.