Procurement outsourcing isn’t new; businesses have been outsourcing their business processes to third-party service providers for quite a long time to save time and energy and significantly cut costs.
With the global economic downturn, it's even more important to be resourceful and find ways to save money when it comes to procurement management. And procurement outsourcing providers can help with that.
It's a process where you outsource key activities involved with buying products and services, such as supplier selection and contract negotiations, to an external third-party provider (also known as a procurement service provider).
In this article, we'll explain what end-to-end procurement outsourcing is and how businesses can use it to their advantage.
What is procurement outsourcing?
Procurement outsourcing is delegating the sourcing and management of goods and services to an external provider. The main aim of procurement outsourcing is to reduce costs and improve efficiency, but many other benefits make it an attractive option for businesses of all sizes.
Lack of an in-house procurement team, budget and time constraints, and a lack of procurement bandwidth are some reasons why businesses opt for procurement outsourcing services.
In simple terms, procurement outsourcing is just a subset of business process outsourcing, where businesses outsource their procurement processes to a third-party vendor or procurement service company.
What are the benefits of procurement outsourcing?
Procurement outsourcing services help businesses improve efficiency and reduce financial costs by fulfilling their product or service needs right the first time. There are five significant benefits to working with an outsourced procurement solution provider, including
1. Cost reduction
This is perhaps the most obvious benefit of strategic sourcing, but it's also one of the most significant. A good procurement outsourcing provider will be able to help you identify opportunities for cost savings across your entire procurement management process.
In addition, they will have access to an extensive network of suppliers, which means you can take advantage of economies of scale and get better deals on the goods and services you need.
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Hiring and training an in-house procurement team can be cumbersome and expensive. In those cases, outsourcing your procurement management process is a viable and cost-effective solution.
2. Improved quality
Through the procurement outsourcing process, you can also gain access to the expertise and resources of the procurement outsourcing companies.
This means they can help you source higher-quality SaaS applications and services at cost-effective pricing. In addition, they can help you implement quality control measures throughout your supply chain, which will help ensure that only the best products and services reach your stakeholders.
3. Increased efficiency
One of the significant benefits of outsourcing procurement operations is increased efficiency in your business operations.
A good provider will have systems and processes that will help streamline your sourcing and procurement processes. This will free up time for your employees to focus on more critical tasks and help improve your overall productivity and operational efficiency.
4. Risk management
Procurement outsourcing process involves transferring some of the risk associated with these activities to your provider.
This includes the risk of supplier default, late delivery, or poor-quality goods and services. By partnering with a reputable provider, you can minimize these risks and protect your business from disruptions to your procurement process and operations.
5. Improved compliance
When you outsource your procurement functions, you also gain access to your provider's expertise in complying with government regulations regarding sourcing and procurement.
This means you can be sure that all of your activities are carried out in compliance with applicable laws and regulations, which will help protect your business from costly fines or penalties.
4 Common risks of the procurement outsourcing process
1. Lack of control and visibility
Outsourcing a business process will affect the transparency of the process. Your team will have zero visibility on the outsourced procurement process, including the progress of procurement negotiations, the reasoning behind the procurement provider's selection of a specific supplier, and other related details.
In addition, choosing to outsource procurement may result in a loss of control over the process, leaving businesses at the mercy of the selected outsourcing company. This may be a concern for some businesses, particularly those with high requirements and budgets.
2. Poor quality
If you don’t select the right outsourcing provider, their inexperience will lead to the selection of a poor vendor and the delivery of defective products. This will directly affect the productivity of your teams and result in low-quality outcomes.
So, everything boils down to your selecting the right procurement outsourcing provider.
3. Increased expenses
Lack of control and visibility will raise uncertainty in the outsourcing process, and the provider might end up charging you more than what you’ve agreed to, like additional fees or service charges.
4. Security issues
Since you’re providing all your data to a third-party provider, there are high chances of security breaches, and you might end up exposing all the sensitive information to the public.
Also, trusting a third-party provider might raise a plethora of compliance issues if the procurement outsourcing provider has not completed the required compliance audits and protocols.
Selecting the right procurement outsourcing services
Either your organization doesn’t have an in-house procurement team, your team is too thin, or you need extra support during peak season. Whatever the reason, the outsourced procurement process is always a good practice.
Four key factors to consider while evaluating potential procurement service companies are:
1. Do they specialize in your industry or sector?
Procurement is a complex function that requires deep domain knowledge and expertise. When evaluating potential providers, find out if they have experience working with businesses in your industry or sector.
- Do they understand your market's unique challenges and opportunities?
- Do they have existing relationships with the suppliers you rely on?
An experienced procurement outsourcing provider can hit the ground running and provide immediate value to your organization.
For example, if you’re outsourcing your buying process to purchase SaaS applications, the procurement service company must be an expert in procuring SaaS products.
They must have a proven track record and a pool of SaaS buying experts readily available to negotiate with the vendors on your behalf. Be mindful of whom you’re outsourcing to; an inexperienced provider will cost you more than you’ve planned.
2. What are their size and scale?
Finding a provider that can support your current outsourcing needs and growth plans is essential. Find out how many employees they have and if they have an established infrastructure.
This will give you a good idea of their ability to support your short- and long-term outsourcing needs. If they can’t handle an increase in scope, it could create problems.
Customer support should be a crucial factor you look for in a procurement service provider. Find out the quality of their customer service, the longevity of their business, and their reputation in the market before selecting one.
3. What is their approach to pricing?
Transparency is vital when it comes to pricing. Make sure you understand exactly how the provider charges for their services.
- Do they charge a flat fee or a percentage of spend?
- Are there any hidden costs?
Getting clarity on these questions upfront will help avoid any surprises down the road. If one provider seems cheaper than others, find out why. There could be hidden costs.
4. What do their references say?
As with any significant decision, getting input from others with first-hand experience working with the provider is always a good idea. Ask them about their overall experience working with the organization—from the sales process through implementation and beyond.
- How responsive are they when issues arise?
- Do they proactively provide recommendations for process improvements?
- Do they make an effort to understand your business goals?
These are all important factors to consider when making your final decisions in choosing a procurement outsourcing provider.
While there are a lot of factors to consider when selecting a procurement outsourcing provider—from their industry expertise and scale to their approach to pricing and referenceable projects.
But by taking the time to do your due diligence upfront, you can be confident that you’re selecting a partner who can help you reach your desired strategic sourcing outcomes—now and in the future.
The Evolving Landscape of SaaS Procurement Outsourcing
As SaaS procurement is becoming the norm in companies, there has been an increased need to outsource and streamline the process.
This can be a challenge, as thousands of SaaS vendors are out there—and new ones are popping up daily.
SaaS buying experts like CloudEagle understand the various SaaS options on the market and can identify the best fit for the company's needs.
CloudEagle is a SaaS management platform with end-to-end procurement outsourcing services to help businesses purchase the right product at the right price.
- CloudEagle’s assisted buying services will take care of your entire process and negotiation in procurement with sufficient transparency.
- Our SaaS buying experts will leverage the latest price benchmarking data to negotiate with the vendor and purchase the right product at the right price.
- CloudEagle is compliant with prominent security standards to keep your data secure.
- We have transparent pricing plans to help businesses make well-informed decisions.
- Years of negotiating experience have given us unprecedented access to 100s of pre-negotiated discounts from SaaS vendors to save on SaaS spending.
- SaaS Procurement workflows of CloudEagle will help you automate your SaaS buying process, thus streamlining the process on the run.
How does CloudEagle benefit your business and team?
Check out how we saved $450,000 for our customers who outsourced their procurement process to us →
You can focus on your core business activities
An outsourced procurement process can free up your time so that you can focus on your core business activities. When you outsource, you can trust that the procurement management process is in good hands and that you will receive the best possible software for your needs.
You will save more money in the long run
Outsourcing your SaaS procurement management process can save you money in the long run. When you work with procurement management software providers like CloudEagle, they will help you get the most bang for your buck by negotiating deals with vendors and helping you find the most cost-effective solution for your business.
Additionally, once you have chosen a software solution, your provider will continue to monitor the market to ensure that you are not paying more than you need to. They will let you know if a better deal comes along and help you make the switch. Win-win!
You will get expert guidance throughout the process
When you outsource your SaaS procurement process, you will have access to expert advice and guidance throughout the process. From managing vendor relationships to navigating complex contracts, your provider will be there to help you every step of the way.
They’ll perform detailed vendor research and recommend which software solutions are right for your business based on their experience with other clients. And if you have any questions or concerns, they will address them promptly.
SaaS procurement outsourcing can save time and money for your organization and empower your teams to focus on strategic tasks and increase t productivity.
Now you know the benefits of outsourcing and how to select the right procurement outsourcing providers.
CloudEagle's years of experience in procurement negotiation have made it a go-to choice for various enterprises. They use both the procurement service and the procurement workflows of CloudEagle for procurement process optimization.
So, what will it be for you?
Do you want to save on SaaS spend and procure the right products without spending too much time on the process?
Book a demo to unlock new opportunities with our SaaS procurement software.