Purchasing SaaS is a time-consuming process as it involves numerous steps, phases, and players. A poor buying decision can lead to a loss of productivity and increased expenses.
Unregulated purchasing practices cost organizations 10-30% of the savings they seek. So, it is essential to avoid procurement mistakes that lead to unwanted expenses.
Mistakes like poor negotiations, impulsive purchases, a lack of an ideal procurement process, etc., can prove detrimental to your procurement activity. And you might end up purchasing an incompatible SaaS product that will not sit well with your users.
Fortunately, multiple SaaS buying software tools are available to streamline your procurement process. But before you start simplifying, you must be aware of these SaaS procurement mistakes made by procurement teams worldwide.
So, without further ado, let’s get started with the procurement mistakes.
Top SaaS Procurement mistakes and ways to avoid them
1. Lack of Proper Workflow
Procurement processes must be efficient and have a defined workflow to achieve operational efficiency. A lack of well-defined procurement processes typically leads to poor purchase decisions.
Without procurement workflows, teams cannot know which tasks are crucial at any given time or which steps to prioritize to complete the process. Furthermore, teams may struggle to coordinate communications, raise requests, and get approvals from numerous stakeholders.
In contrast, poorly defined procedures result in chaotic functioning, shadow IT, and unmanaged purchasing.
Moreover, without proper workflows, duplicated requests, unnecessary spending, and inadequate record-keeping result in lost time, delays, and other problems.
Procurement softwares like CloudEagle will help you create an ideal procurement process for your business.
This tool uses customizable intake forms to help requesters raise requests for any type of purchase. The request will be automatically assigned to the right stakeholder, and once it is approved, the procurement team can interact with the finance team and purchase the product.
CloudEagle centralizes your procurement process, eliminating unverified spending and shadow IT, which are the common reasons for high SaaS expenses.
2. Poor Negotiation
The second typical mistake is failing to negotiate SaaS contracts properly. Often, businesses assume the software's cost cannot be lowered and don’t make much effort to negotiate.
However, that is not true; you don’t have to pay the list price every time, and there is always room for negotiation. But to effectively negotiate, procurement teams must clearly understand the requirements.
Often, Procurement teams hurry through contract discussions without fully considering the company's specific needs. This leads to a lack of data during negotiations, and you’ll end up paying high for the product.
To avoid this excessive expenditure or waste, SaaS purchasing teams must pay close attention to the business requirements and the vendor management aspects of the purchase process.
Or you can use a SaaS procurement tool like CloudEagle to perform vendor research and gather app usage insights for existing applications.
If your procurement team is busy with more strategic tasks, you can seek help from the assisted buying experts to perform the vendor research for you, negotiate on your behalf, and secure the best deals.
This will help your procurement team focus on their tasks while CloudEagle’s experts do the heavy lifting.
Saving on SaaS spend starts with procurement negotiations. So it is essential to make the right decisions here, and CloudEagle will help you do so.
3. Moving too quickly or slowly
When a business identifies the need for a specific type of SaaS platform, it is usually an urgent necessity. With such a sense of urgency, hurrying into a purchase or commitment can be tempting.
Moving too quickly can cause significant problems. When you move too quickly, you frequently fail to analyze several possibilities rationally. It also implies that you do not devote enough time to appropriate vendor research and negotiation.
Then there's the contrary issue: moving too slowly. You don't have weeks or months to complete an RFP process when your company needs a high-quality SaaS product to tackle an organizational problem.
You must take action at the right pace to not frustrate the vendors, or they might close the door on you.
Maintain the right balance while making crucial purchase decisions, keep the vendor in the loop, ask the right questions, and proceed with the purchase after thorough consideration.
This will eventually help your company get the best value for money and the benefits it requires from a SaaS solution without having to wait an unreasonable amount of time.
4. Overspending due to oversizing deals
When evaluating a complex buying process, it might be tough to distinguish between what is essential and what is not. Procurement departments frequently struggle to differentiate between a possible solution's "must-need" and "might-need."
By offering special discounts and bundled pricing plans, sellers often persuade their customers to buy more than required in capacity, performance, and features; the process becomes even more convoluted. This is referred to as "super-sizing" the contract.
Similarly, businesses may feel obliged to purchase additional software or systems to take advantage of bigger discounts. While this may seem like cost savings relative to the asking price, it can ultimately raise the total cost by overbuying.
Often, businesses purchase products with additional features during special deals and only use half of them. And during the renewals, vendors will demand the buyer to pay the complete pricing of the product, irrespective of the usage.
So, don't get distracted by a SaaS vendor team's shiny, discounted deals. You should determine what your firm requires from a SaaS solution and only pay for that. If you do use bundled pricing, be careful to negotiate contractual terms that safeguard your investment.
For instance, when signing a bundled deal, include a clause preventing you from paying more during the renewals. Or you can sign a clause that enables you to remove the features from the plan that your team isn’t using.
5. SaaS buying without exploring other Vendors
Competition is not only healthy but also rewarding. It's a mistake to go with the first supplier you examine (or to remain with the one you have always had) when buying software or renewing a deal. While it may save you time, you might miss out on more cost-effective alternatives.
There are numerous reasons why businesses don’t prefer to switch from a specific vendor,
- A member of the team has already used a specific system.
- Someone on the team knows somebody who works for a particular platform.
- There isn't much time to waste, so the team concentrates on the first site on a Google search page.
However, there are strong reasons why your firm should explore all options before settling on a single solution:
- One of the alternatives/options may provide precisely what you require at a lesser cost.
- An alternative SaaS platform may be more adaptable or suited to your existing workflows.
Again, these are just a handful of reasons why you should do some research before selecting. There are probably more factors that are unique to your company and circumstances.
Platforms like CloudEagle possess an AI-powered vendor recommendation engine to help you find multiple vendors. You can also use the price benchmarking data to compare competitive prices and shortlist various vendors before settling on one.
6. Not considering ROI
SaaS products are often provided on a month-to-month basis or through year-long contracts. Before making a purchase decision, ensure you have a strategy in place to assess the ROI of any SaaS product.
ROI determines the return on an investment in relation to its costs. It is utilized in analytics and acts as a standard for defining future SaaS purchases.
When it comes to yearly budgeting, you will have to show how a system assists the firm. Before adopting a SaaS platform, determine the ROI you require and implement mechanisms for evaluating ROI as you utilize it in the first year.
Determine the long-term effects of annual increases on your operating costs. This allows you to identify which SaaS products and services are effective and which might be improved. Include projected SaaS renewal fees in ROI calculations before purchasing hardware and software.
7. Not Having a Procurement Software
Another major procurement mistake is failing to use technology to enhance your organization's buying process. Organizations may be hesitant to adopt procurement software or solutions due to cost, change in management, security issues, or for fear of becoming trapped in a lengthy deployment process with a slow time-to-value.
However, not automating the process might result in frequent mistakes in the procurement process, which can cause delays because your procurement team is constantly tasked with addressing problems rather than advancing procurement procedures.
Since manual procurement procedures are time-consuming, employees often spend hours entering, updating, and looking for data and documents.
On the plus side, 54% of employees believe that automating routine chores might save them up each year.
You can use digital procurement software to automate purchase orders and approvals while keeping an eye out for chain bottlenecks. The use of procurement software eliminates the issue of human mistakes and long procurement processes.
Procurement softwares like CloudEagle can help you streamline your SaaS buying process with robust workflows, intake forms, rapid approvals, price benchmarking data, and more.
So it is always a good practice to outsource your procurement activities to a cloud-based procurement system.
8. Isolated or decentralized purchase process
A lack of a procurement process or digital SaaS buying software will lead to decentralized purchasing or "shadow IT."
Purchasing a SaaS product is pretty straightforward; you only need a corporate credit card, and an employee can buy it within seconds. This shadow IT will lead to undesirable changes in the system, increased spending, or even security breaches.
To prevent this decentralized purchasing, the procurement team must,
- Define the procurement leader responsible for approving all the purchases.
- Limit credit card access to the employees
- Create a procurement process
- Use software to centralize the procurement process.
- Announce penalties for decentralized purchasing.
- Use SaaS application discovery tools to get a bird’s eye view of your SaaS stack.
Employing these steps can prevent isolated or decentralized purchases in your business.
9. Disorganized Vendor Management
Your vendors are an excellent resource for learning about available products and services and finding excellent deals. Maintain a strong relationship with vendors and stay updated with their product announcements to take advantage of everything that could be valuable to your firm.
According to a recent poll, nearly 60% of businesses have taken steps to improve the quality of their supplier relationships.
Poor vendor management can lead to auto-renewals, inaccurate SLAs, vendors controlling the deals, etc. This is where you need a vendor management system to keep track of your SaaS vendors and manage them effectively.
Vendor relationships are not something to overlook; they are more like your business partner. So, to stay on their good side, it is essential to use a system to effectively manage all the vendors and stay updated with their policies and price changes.
10. Forgetting about renewals
When selecting SaaS products, keep upgrades or renewals in mind. Who will be in charge of the upgrade process? Does the vendor offer assistance during the upgrade process? Those important issues must be addressed during the SaaS procurement cycle.
Consider that you have invested in an enterprise-level SaaS product. The platform's deployment proceeds smoothly, and team members rapidly adapt and begin using it. Everything is OK until the first renewal comes.
A SaaS platform's value may vanish without the proper framework to manage renewals. That is why, before purchasing, it is essential to resolve renewal-related concerns.
But you don’t need to sweat it; CloudEagle’s renewal workflows will be triggered 90 days in advance, automatically assigned to the stakeholder, and keep escalating until the contract is renewed.
Eliminate the renewal hassles by automating them using CloudEagle workflows.
11. Weak Contract Management
The multi-stage procurement process exposes your company to legal requirements you may not know about. Also, the improper contract term might cost you money and bind you to services you may not require for the entire duration.
So a legal entity should be present when signing a new contract. All the SLAs, compliances, and clauses must be verified before you sign the contract.
And then comes the bookkeeping process: ensuring that you have a centralized storage system to store your contracts, which must also be easy to retrieve during audits and renewals.
Most businesses don’t follow the right practices to store their SaaS contracts. They often get lost in emails or shared folders. You must use a contract management system for centralized storage and easy retrieval.
Maintain control over your contract management process by ensuring that data inputs are exact, complete, and up-to-date leading to contractual agreements that are legally compliant. Also, allow at least a few weeks for your legal team to conduct the appropriate due diligence.
12. Failure to enforce compliance policies
Clear internal and external policies are critical to regulating your company's buying strategy. Without internal compliance regulations, purchasing teams will likely use isolated strategies when executing everyday procurement activities.
This will impact the smooth operation and standardization of your company's purchasing. The company's procurement policy guides employees in adhering to purchasing procedures and maintains a good track record throughout all purchases.
As organizations scale and adjust to changing market conditions, compliance and procurement policies must be updated regularly to best fit the company's current demands.
Share a robust external compliance policy with your vendors since it fosters reliability, stability, and integrity in the vendor-buyer relationship.
Establishing precise purchasing terms and conditions protects you from potential legal issues and ensures that products and services are supplied exactly as stated and agreed upon in the purchase.
Why do you need SaaS procurement software to avoid procurement mistakes?
The common procurement mistakes described in the preceding section highlight the necessity to eliminate outmoded, manual processes in the procurement process.
Many concerns and common errors in procurement workflow procedures are eliminated when automation technology is used effectively.
Automating the procurement process increases the speed and productivity of the team and allows them to focus on more crucial tasks.
CloudEagle is a comprehensive SaaS management tool that can provide app visibility, identify duplicate apps and shadow IT, automate provisioning and de-provisioning, and more.
Here's how CloudEagle can assist your procurement team,
- Streamline the procurement process: CloudEagle simplifies the process using automated procurement workflows. Procurement staff can immediately spot bottlenecks as there will be complete transparency over the process.
- Less manual errors: With CloudEagle, duplicate data entries and paper handling problems can be avoided. This software uses customizable digital intake forms for contracts, tenders, and purchase orders that can be searched and tracked promptly.
- Improve internal and external stakeholder communication: Companies can make explicit decisions about what needs to be addressed and receive reminders of time-sensitive deals with CloudEagle.
- Never forget Renewals: With SaaS software like CloudEagle, you can never miss renewals; with advanced automation tools, firms can begin renewals 90 days in advance.
- App usage: CloudEagle’s app usage insights will show you how your teams are utilizing the software. You can use the data to re-negotiate with vendors during renewals and procure an affordable subscription.
The 12 SaaS procurement mistakes mentioned above are common for startups and established businesses.
CloudEagle exists to assist businesses in choosing the best SaaS solutions and saving money on procurement and subsequent operations. It can help your company by:
- Choosing the best SaaS packages to fit your specific requirements
- Bringing visibility and adding transparency to your current set-up
- Eliminating unneeded licenses
- Avoiding the pitfalls in the procurement process
- Cost, consumption, and compliance tracking (like GDPR)
- Negotiating with your vendors to obtain the best possible prices
Are you ready to simplify your SaaS procurement process? Talk to our experts now.
Frequently asked questions
1. What are the three factors that influence SaaS procurement planning?
Three characteristics that influence procurement planning
Market Research: Before developing a procurement strategy, the buyer must first understand the industry's market dynamics from which they intend to procure or buy.
Spend Analysis: The amount the firm is willing to invest in purchasing the software must be analyzed.
Need Analysis: The need/ requirement of the kind of software essential for the firm must be assessed before the purchase
2. What are the five stages of the SaaS procurement process?
The Procurement Stages
Stage 1: Determine the need for products and services.
Stage 2: Create and submit a purchase request
Stage 3: Assess and select suppliers and vendors.
Stage 4: Negotiate contract conditions with the chosen supplier.
Stage 5: Complete the purchase order.
3. What is the "golden rule" of SaaS procurement?
The golden rule is to take your time. Procurement is often rushed because current contracts are about to expire.
Before putting pen to paper on the requirement, the procurement team must consider a re-procurement practice at least twelve months before the deadline to provide precise strategic planning.