How long does it take to narrow down a SaaS vendor? A week or a few months? Generally speaking, the longer the procurement process, the better the deal, right?
Well, that’s a tricky one to agree with.
You could spend weeks sourcing the right information to improve your latest SaaS deal, but you might be wasting your time if you stick to the old and outdated buying methods. In fact, according to Vertice, 90% of SaaS buyers end up overpaying.
SaaS has permeated almost every aspect of normal business operations. So much so that no organization, whether a budding startup or a multinational corporation, can work efficiently without investing in these services.
But finding the right SaaS application can be tricky, and the buying process will have its hassles, especially when pricing isn’t always transparent and contract negotiations fall short of your expectations.
Thankfully, we’re here to help you out. We’ll cover some critical aspects of SaaS procurement and the best practices to simplify your SaaS procurement process.
SaaS procurement process
A SaaS procurement process includes everything that goes into procuring and integrating a new SaaS product.
Right from identifying the software needs to researching the right products and SaaS vendors to eventually negotiating a cost-effective deal, SaaS procurement can be incredibly complex. It can involve as many as 27 distinct steps.
As cloud-based procurement has drastically taken over its more traditional on-site counterpart, the entire process of product research and acquisition has also evolved into a strategic undertaking of its own.
Successful SaaS procurement now entails fully re-evaluating negotiation tactics, collecting the right information, and carefully screening proposals.
When done right, SaaS procurement can provide lasting benefits for an organization, helping it improve competitiveness and reduce overall operational expenditure.
What are the do’s and don’ts of the SaaS procurement process?
To get that extra boost the next time you initiate negotiations with a SaaS vendor, we’ve compiled a list of specific best practices and common SaaS procurement mistakes to keep in mind.
These will give you a complete picture of what to expect when purchasing a new product and how to minimize needless pitfalls while saving monstrously on costs.
Do’s - SaaS Procurement best practices
1. Do your due diligence
Identifying your business goals and objectives from the get-go can save you a lot of time later on by preventing you from negotiating for the wrong things.
Speak with key stakeholders and take note of the core requirements and functionalities that will assist you in your search for the right vendor.
Aligning your procurement strategy with pre-established goals can go a long way toward helping you find the best software for your needs.
2. Audit your existing ecosystem
Before you hunt for an entirely new SaaS product, check your existing tech stack for any applications with overlapping features that may be better suited to your needs.
Different teams within an organization often purchase separate packages, leading to software duplication and redundancy. Once identified, these can be appropriately utilized, which may even eliminate the need for new purchases.
3. Take your time to understand the contract
Give yourself and your team plenty of time to understand the proposed contract. Pay attention to the pricing plans, overages, range of features offered, limitations of different levels of subscriptions, and most importantly, how your business can access and use the final product.
An in-depth understanding of your vendor’s offerings can assist you in negotiating a better deal.
4. Right-size your contract
More often than not, organizations end up paying for features they never really end up using. To ensure intelligent SaaS procurement and management of SaaS software, track the frequency and depth of usage.
Evaluating log-ins, feature use, and employee feedback can help determine how much value you get from your contracts.
5. Ensure adherence to security standards
Before signing any vendor agreement, run it by your business’s IT, legal, finance and procurement teams. Ensuring the product’s financial and data security compliance is key before you finalize the deal. This will help you avoid possible fines and lawsuits.
There are various security audits and guidelines that SaaS applications must adhere to. Double-check if the vendor has passed the necessary compliance audits like,
- PCI DSS
Most SaaS vendor agreements include an auto-renewal clause, meaning you only get a standard 30 days to review your contract before you are automatically committed to another term.
Being aware of your SaaS renewal dates and conducting regular reviews of your SaaS portfolio can help you find and eliminate "shelfware," i.e., services that aren’t being used, before their renewal. Doing this at least 90 days before renewal can give you and your vendor enough time to discuss concerns and re-negotiate the offer.
“At any point in time, IT operations may run with 25% or more of software going unused.” - gartner.com.
7. Use a SaaS procurement solution
SaaS procurement is a tedious process as it involves multiple vendors, contract management, negotiations, vendor research, requirement analysis, etc. Tracking all these processes manually is not feasible in the long run; it’ll cause productivity loss and quick team burnout.
Procurement teams must always stay sharp and on top of their game, which is why you must use a SaaS procurement platform to increase productivity and save time.
There are multiple procurement software solutions in the market; one on the list is CloudEagle, a comprehensive SaaS management software with robust procurement services and automated workflow features.
Why invest in manual efforts when you can automate your procurement process and let your team focus on more strategic tasks than taking care of the repetitive process?
Don’ts - Mistakes to avoid in SaaS procurement process
1. Impulsive SaaS buying
Not shopping around is one of the most easily avoidable mistakes you can make in your SaaS procurement journey.
With the abundance of options in the market, comparing different SaaS vendors based on their features, pricing, support, etc., can be readily accomplished.
Confining your research to one supplier can cost you a much cheaper and more suitable offer from a competitor.
2. Not being aware of essential requirements
Going into the SaaS buying process without fully understanding your business needs and which features can genuinely drive value for your company can be detrimental.
It is essential to first understand the “why” behind your SaaS purchase decision and to fine-tune your evaluation process for the best fit. We recommend you start by first determining the following:
- Operational drivers (e.g., fragmented data, flawed analytics, etc.)
- Aspirational drivers (e.g., new markets, new operational structure, etc.)
3. Not doing a test run
Thorough testing is crucial for informed decision-making when it comes to SaaS solutions. With the influx of new entrants and heightened competition in the SaaS industry, it has become typical for companies to offer free trials.
Involve relevant team members from your company in the testing process to ensure that the SaaS platform does not do more or less than it needs to.
4. Rushing the procurement process
It is imperative to give the SaaS purchasing process plenty of time to materialize. Moving too fast can eat away your negotiation leverage and leave you settling for a bad deal that may not be in your best interests.
As your stakeholders demand quality software within a reasonable time frame, taking too long to finalize a vendor can cause serious problems such as decreased operational efficiency, interrupted workflows, and stalled production.
Alternatively, moving too slowly can also be damaging. We recommend wrapping up your SaaS within 90 days as a safe bet.
5. Forgetting to involve key stakeholders
Agreeing to a deal without getting the green light from your company’s legal and financial departments isn’t ideal. Before making any commitments, you must get the contract fully approved. This will prevent any chances of revoking the agreement and starting the process again.
6. Failing to understand the contract terms fully
SaaS enterprise contracts can be expensive and often come with hidden or ancillary costs attached to them. You must understand everything about what is being offered to get the perfect service for your needs without digging too deep into your pockets.
This will help you weed out redundant features and optimize your subscription to save money in the long run.
7. Not negotiating
Negotiations are integral to the SaaS procurement process and cannot be overlooked. A well-informed negotiation strategy ensures you can put forward your business’s most pressing needs and how you intend to use the service.
You can then build a lasting rapport with your provider and enter into an agreement that benefits both sides.
If you’re understaffed or lack the bandwidth to negotiate, you can always seek help from assisted-buying experts. They can negotiate on your behalf and secure the best deals.
8. Disregarding the end-user experience
SaaS procurement decision-making is often not in the hands of the end users. Maybe your company’s IT department is responsible for SaaS buying, or perhaps it is handled by a hired procurement specialist.
Either way, don’t finalize a purchase without getting feedback from the employees who will be using the software. If you allow relevant team members to weigh in much earlier in the procurement process, you can bet on making the most prudent decision.
Click here to learn more about SaaS procurement mistakes.
Typical SaaS procurement process challenges
1. Excessive shadow IT
One of the most common challenges in SaaS management is the presence of "shadow IT," i.e., an abundance of paid software or IT systems that are used without the approval of the IT, finance, or legal departments.
A high proliferation of shadow IT can lead to several issues besides wasted expenditure. The heightened risk of a data breach, redundant software, and compliance issues are all serious challenges attributable to shadow IT.
2. Inability to grasp the requirements
Aligning your SaaS procurement strategy with your department’s most urgent needs is not always as straightforward as it may seem.
You may choose the wrong product if you cannot identify and understand the specific properties required of a SaaS solution.
This can, in turn, lead to wasted time and resources as well as dissatisfaction among end-users.
3. Managing vendor relationships
Successful SaaS procurement and implementation can only be accomplished through effective supplier management.
Maintaining a collaborative relationship with your SaaS vendors and keeping track of pre-established KPIs while ensuring a steady supply of quality products can be difficult.
This becomes incredibly challenging when your SaaS stack grows exponentially.
4. Lack of transparency and internal communication
As your company grows aggressively, SaaS spending becomes less visible and transparent. You may know your overall SaaS stack, but are you getting your money’s worth out of each tool?
For example, is your DevOps department entirely using the latest workflow software? Are all the features you negotiated for actually proving useful?
In addition to managing redundant software, maintaining continuous inter-departmental communication can also be a challenging aspect of SaaS management.
Without proper visibility, it can be hard to identify overlapping products with the same functionality and features but entail additional spending.
5. Lack of digitization in the SaaS purchasing process
Without a well-established, data-driven SaaS management system, it can be challenging to maintain a seamless record of your total software footprint. Initially, implementing SaaS procurement automation may pose challenges.
However, it can significantly reduce costs and increase efficiency once fully adopted.
SaaS tools house sensitive information, such as customer addresses, financial data, browser activity, etc. These can be easily compromised in a data breach, phishing attack, or accidental leakage.
Complying with relevant data security standards and keeping confidential material safe from prying eyes can be challenging, especially without proper SaaS management.
The biggest challenge is procuring software that follows all the essential security audits and guidelines. Security compliance is a crucial factor to look for in SaaS licenses.
Streamline SaaS procurement with CloudEagle
SaaS procurement is not always easy to crack. There are many things to take care of: stakeholders to collaborate with, vendors to negotiate, and security measures to enforce.
The entire process, from research to implementation, can take quite a lot of time and effort.
Although it is possible to establish an in-house procurement team to manage the process, most businesses prefer to outsource SaaS procurement to an external provider like CloudEagle.
Outsourcing your procurement process has its benefits, as it can save time for your procurement team and boost their productivity.
CloudEagle has spent years researching and developing a robust SaaS management and procurement platform to help businesses streamline their procurement processes.
CloudEagle has customizable intake forms depending on the type of purchase. Requesters can raise any type of purchase request using the form, and the request will be automatically assigned to the respective stakeholders thanks to the workflows.
The entire process is transparent with procurement workflows, making the request approvals quicker and not requiring the procurement teams to chase behind the stakeholders to get them approved.
Now, that the procurement team has the approval to purchase the product, they’ll collaborate with the finance team, find a suitable vendor, compare the prices, negotiate with the vendors, and purchase the product.
Vendor research and negotiation are prone to hassles if your team needs more bandwidth. Once again, CloudEagle can help you out here with assisted buying services.
We’ll assign experts who can perform detailed vendor research for you, leverage price benchmarking data, compare competitive prices, negotiate with the vendors on your behalf, and purchase the product at an affordable price.
Your procurement teams can relax, as CloudEagle experts will do all the heavy lifting. Now, this is how CloudEagle streamlines the SaaS buying process.
CloudEagle has a comprehensive integration library and can manage the entire SaaS lifecycle from app management, procurement to spend management and user management.
It can be a powerful tool for your IT, finance, and SaaS procurement teams to stay on top of renewals, reduce operational burden, optimize SaaS stack, automate onboarding and offboarding, and cut down on shadow IT within your system.
Ready to take the stress out of SaaS procurement? Book a free demo with us and start saving today!
Frequently asked questions
1. What is SaaS procurement software?
SaaS procurement software is a tool that helps business leaders and IT professionals procure the right tools for their needs at the right price and at the right time.
They offer a seamless platform for users to better manage their subscriptions, licenses, contract negotiations, invoices, renewals, and everything else accompanying SaaS acquisition and implementation.
2. What are the four stages of SaaS procurement?
- Identifying a need for a product or service
- Creating and submitting proposal requests
- Evaluating and selecting a supplier
- Final purchase and delivery
3. What is the difference between purchasing and procurement?
Purchasing is one of the final stages of SaaS procurement. While procurement refers to identifying needs, finding vendors, and agreeing to contract terms, purchasing is making payment for the selected service.
Purchasing is limited to the transactional aspect of SaaS management, whereas SaaS procurement encompasses a broader range of activities.