Sourcing vs Procurement: What is the Difference?

Clock icon
min read time
February 19, 2024
Share via:

Sourcing and procurement - while both encompass the acquisition of goods for an organization, the terms represent two distinct processes with noteworthy differences. The two terms are used interchangeably when sourcing is just a small part of procurement.

In terms of IT organizations or SaaS, sourcing and procurement are related to the acquisition of SaaS applications or software in an enterprise. This blog highlights the nuances and key differences between sourcing and procurement.

Let's delve into the intricacies of each term and gain clarity and insight into how these processes play pivotal roles in shaping the strategic and operational aspects of businesses.

Sourcing Vs Procurement

Before discussing the difference between sourcing and procurement, it is imperative to understand the meaning of sourcing and procurement individually. Below, we have briefly tried to break down the two terms for your understanding.

What is sourcing?

Sourcing processes are a part of purchasing and are the initial phase of supply chain management.

It embodies the strategic process of identifying required resources and choosing the right vendors for your organization.

Your sourcing team is responsible for comprehensively assessing potential supplies based on quality, reliability, cost, and integrity.

It encompasses activities like searching for vendor information, getting quotes from supplies, calculating lead time, determining minimum order quantities, conducting risk assessments, and more.

The end goal with sourcing is not just finding the cheapest supplier. Buying cheap materials may deteriorate the quality of your products. Therefore, sourcing is about striking the balance between affordability and quality.

When you strike a balance between the two, you save costs and deliver enhanced-quality products for your customers.

What is procurement?

Procurement encompasses processes for seamlessly acquiring goods and services to realize an organization's requirements. It is also related to the organization acquiring the right SaaS apps or software.

For instance, your organization requires a SaaS solution for cost optimization.

You will start by researching the available SaaS cost optimization solutions in the market and meticulously evaluating them based on various factors. Once you decide on the service provider, the payment is sanctioned.

All these steps are part of an enterprise's procurement management process. Sourcing strategy is a small part of this process.

Procurement goes beyond the transactional activity of sourcing. It is a multifaceted process that emphasizes enhancing efficiency, establishing cost-effectiveness, and mitigating risks.

Typically, the procurement process involves procurement software and procurement professionals to:

  1. Identifying software requirements within your organization
  2. Creating a purchase requisition (it is a document created within your organization to request a purchase of SaaS apps)
  3. Shortlisting potential suppliers & issuing RFQ or RFP
  4. Requesting and reviewing quotations and choosing the vendor (depending upon various factors)
  5. Finalizing the vendor
  6. Creating purchase orders and negotiating better payment terms and SLAs
  7. Receiving the ordered items and auditing them to ensure quality and compliance
  8. Receiving the receipt and an invoice; making the payment
  9. Three-way matching
  10. Evaluating the supplier performance as per requirement
  11. Establishing long-term supplier relationships

Differences between sourcing and procurement

Now, let us demystify the crucial disparities between sourcing and procurement.

image showing difference between sourcing and procurement

Now that we know the difference between sourcing and procurement, it is imperative to note that procurement is a complex process that involves multiple stages. In addition to sourcing, it also involves purchasing, contract management, long-term supplier management, and data analysis.

Sourcing is a subset of procurement. It directly impacts an organization's bottom-line morale, performance, and efficiency.

Outsource your procurement process to CloudEagle

In an organization, the procurement department acts as a bridge between the internal team and the vendors. However, SaaS procurement demands an exhaustive understanding of company needs and knowledge about vendors' competitive landscape, various pricing models, and complex licensing models and terms.

Not all teams have experts on their procurement teams with extensive SaaS buying experience. Moreover, your procurement team might lack the bandwidth and time to focus on the entire procurement lifecycle.

Challenges faced by In-house Procurement Teams

  1. Lack of in-depth insight into app usage. Your procurement team would have to spend hours understanding how other teams use various high-quality products and apps to analyze usage.
  2. Most SaaS buyers end up paying more than the industry benchmark. This is because of the lack of awareness of how much others paid for the same product. This is why information about the latest price benchmarking is needed & helps in making the right purchase decisions.
  3. Even if you have usage data and the latest pricing benchmarks, not knowing the right pricing models & vendor negotiation strategies keeps you at a disadvantage. As a result, you might accept unfavorable terms or end up overpaying.

As SaaS software procurement can be quite challenging and full of complexities, businesses tend to outsource this process to SaaS procurement experts - like CloudEagle.

Outsourcing your SaaS buying process to CloudEagle helps you save time, increases your team's productivity, and enables them to concentrate on strategic tasks. With the help of our experts, you can achieve:

  • 30% reduction in SaaS spend
  • More than 500 hours saved per annum
  • 100% visibility into your procurement process

How CloudEagle Can Help You Streamline Your Procurement Process

CloudEagle is an end-to-end SaaS management, cost optimization solution, and procurement platform. This procurement solution gives you 100% visibility into your SaaS buying process. It not only streamlines but also helps you automate your SaaS procurement process.

Here’s how CloudEagle systematizes & enhances your SaaS procurement strategies:

CloudEagle works like your extended team - With you

Our SaaS buying experts work in alignment with your internal team. We listen to your valuable suggestions and consider your insight at every step.

We analyze your app usage and team requirements and conduct competitive research to find potential vendors. We also negotiate on your behalf to help you get your favorite SaaS apps on your terms.

Updated price benchmark data

CloudEagle has access to the industry's most recent price benchmarks from trusted sources at all times. Equipped with this data, our procurement negotiation specialists know the negotiation do’s and don’ts and ensure you pay a fair price for the software.

They conduct extensive market research and leverage their expertise to ensure you don't have to settle for vendor list price quotes.

App & platform usage insights

CloudEagle's comprehensive integration library can be integrated with the applications you use to get information on your SaaS stack. This feature gives you a complete insight into the apps purchased, their usage, and the number of licenses bought. You also get insight into the shadow IT happening in your organization.

Image of CloudEagle's dashboar5d

Based on this usage data, you can reclaim unused licenses and reallocate them to employees who need them. Alternatively, CloudEagle’s experts can help you leverage the reduced scope and right-size those licenses. This results in increased cost savings and license optimization.

Managing auto-renewals

Auto-renewals usually come as a surprise and lead to unexpected costs if you lack an automated renewal tracking system. CloudEagle automatically extracts contract data and creates renewal calendars. You can configure auto-renewal workflows to stay ahead of renewals.

Image of CloudEagle's renewal workflow

CloudEagle’s platform sends alerts 90 days before the renewal date approaches. This gives your team and our experts sufficient time to analyze the usage data, perform market research, harness price benchmarks, and prepare for renewal negotiations.

Automated procurement workflows

Our solution also has automated workflows that streamline & accelerate your purchasing process. Through CloudEagle, you can configure your workflows for multiple purchases.

When you raise a purchase request, the workflow will be initiated, and stakeholders will be notified through email, Slack, and in-app notifications. Harness pre-built workflow templates readily available for use cases such as renewal, procurement, and billing.

Slackbot for procurement

As all your teams stay connected through Slack, all stakeholders are always updated with what's happening. Using Slack for procurement, you can enhance productivity by about 2 times and save 25% on coordination.

Not just collaboration, users can raise purchase requests from Slack, and stakeholders can either approve or deny them without needing to visit the CloudEagle platform. You can manage the entire renewal process on Slack.

You can book a demo with our experts to learn more.

What You Get With CloudEagle As Your Procurement Partner

Increased productivity with CloudEagle

By outsourcing your procurement to CloudEagle, your procurement team can save time and focus on other crucial tasks. This leads to increased productivity and lowers burnout for your team.

Efficient management of tail spend

Even the tiniest spend can greatly impact a company's bottom line. The often overlooked, small purchases that silently eat away at a part of your budget are called tail spend.

Our experienced SaaS buyers work meticulously with your organization to analyze, eliminate, or optimize these minor tail spends and expenses. They help you spot cost-saving opportunities & keep avoidable expenses at bay.

You invest less than what you invest in an in-house team

Hiring a professional negotiation team and training them isn’t easy or cheap. It consumes a lot of time and money, which can be saved by outsourcing the sourcing and procurement to CloudEagle. Our negotiation experts have years of experience in negotiating contracts with vendors.

Versatile terms within the contract

With years of experience, we have expanded our vendor network and cultivated positive vendor relationships. We also help you decide which clauses to agree to and what not to. You can leverage this to get flexible terms in your contract, such as:

  • Get support on priority to get issues fixed at the earliest
  • Better terms for support (you can raise support requests through phone instead of just chat or email)
  • You can select the billing cycle as per your choice (Monthly/quarterly/annual)
  • No/lesser fines are charged for delays in payment (up to a certain period)
  • Price locks for future
  • Security & compliance posture checks of the vendor are done from our end

For more details to help you decide, please check out why procurement teams opt for ClourEagle.

Regarding SaaS procurement, a recommended tactic is to take a proactive rather than a reactive approach. A procurement partner like us can help you gain the right insights on time and pricing benchmarks and set up automated renewal workflows.

Sourcing Vs Procurement - Conclusion

You can invest time and money in building a procurement team from scratch. However, the smarter option would be to outsource an industry expert to handle the procurement and negotiation processes.

Liberate your procurement teams from time-consuming vendor research & complicated SaaS buying negotiations. CloudEagle has the right capabilities, skilled procurement experts, and well-equipped professionals to handle your end-to-end SaaS procurement process.

They are well-versed in the latest pricing benchmarks and smart negotiation strategies to help you get the best deals.

Book a demo with our professionals, and let us explain how we can move forward.

Written by
Joel Platini
Content Writer and Marketer, CloudEagle
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Donec pellentesque scelerisque arcu sit amet hendrerit. Sed maximus, augue accumsan hendrerit euismod.

Discover how much you can save on SaaS

Calculate SaaS savings and start optimizing today!