According to a Fortune Business Insights report, the global software-as-a-service (SaaS) industry is worth more than $130 billion – and that is expected to be just the beginning for this rapidly expanding space. The selection of SaaS products on the market is so huge that it can be difficult to know where to start when procuring new services. That’s why SaaS procurement has become one of the most important processes for any large business.
In this guide, we’ll review what SaaS procurement is, explain how to manage procurement, and talk about some best practices to get the most out of your procurement process. Let’s dive in.
Key Highlights
- SaaS procurement is the process in which a company assesses and chooses SaaS vendors and tools. This requires different skills and knowledge than traditional procurement, as the company is not purchasing physical products, and these payments are often recurring in nature.
- A SaaS procurement solution is software that helps organizations to manage and execute their SaaS procurement. It can include tools that help you find and evaluate SaaS vendors, manage contracts, track your spending and measure your ROI.
- When a company outsources its SaaS procurement, it can focus on other parts of its business. This means that the procurement process can be managed more efficiently and that the vendor selection process can be accelerated.
So, what is SaaS procurement?
SaaS procurement is the process in which a company assesses and chooses SaaS vendors and tools. Unlike traditional procurement, like say buying a couch – SaaS procurement is unique as payments are recurring and the business implications of these decisions can be huge.
One of the reasons SaaS procurement has become so important to many organizations is that software has replaced hardware and human capital in many companies’ key functions.
There are a few ways SaaS procurement happens. At first, it’s customary for individual employees and teams to make decisions and manage their own SaaS procurement. Over time, as companies grow, this becomes impossible to manage because of the inefficiency associated with independently procuring dozens of SaaS contracts and tools across departments and teams.
This is also cost inefficient as:
- Companies often have duplicate tools;
- Companies do not consolidate license counts for better volume-based discounts
- Companies overspend on tools that do not integrate with the rest of the tech stack.
When an efficient SaaS procurement process is in place, companies have the right subscriptions for each team and each SaaS vendor is vetted and considered carefully before full implementation. A SaaS management solution then ensures that these tools are used well, closing the loop on the procurement process.
What is a SaaS procurement solution?
A SaaS procurement solution is software that helps organizations to manage and execute their SaaS procurement. It can include tools that help you find and evaluate SaaS vendors, negotiate and manage contracts, and track your spending.
A SaaS procurement solution should allow you to manage licenses, contracts, payments and billing, and more, all in one place. In many cases, a SaaS procurement solution is also the primary management tool for negotiations which can occur monthly or manually depending on the size of the organization and the initial contract for the subscription.
What is a Saas Manager?
Your SaaS Manager is the team member responsible for procurement, management, and analysis for contract renewals with SaaS vendors. This person might be the team lead for your SaaS spending and procurement, or they might be the only person in charge of making decisions when it comes to SaaS vendors.
Companies have increasingly started hiring designated SaaS managers. A typical job description, along with key roles and responsibilities are laid out here.
The SaaS Procurement Process
There is no one SaaS procurement process, as the process will vary based on the organization and its needs. However, the following steps are typically involved in SaaS procurement:
1. Identify the need
Before starting the procurement process, the organization first needs to identify the need for a new SaaS service. This could be something as simple as knowing that the organization needs a new tool to improve its workflow, or it could be something more complex, such as needing to replace an entire product suite.
2. Evaluate the options
Once the need has been identified, the next step is to evaluate the available options. This will involve gathering information about the current vendors and products in the market, as well as exploring new options that haven’t been considered before. While evaluating the market, some sophisiticated buyers will run an RFP process, mapping various tools, their strengths and weaknesses.
3. Choose a vendor
Once the options have been evaluated, the company will choose a specific vendor. This will usually involve a formal evaluation process where the vendor is given a detailed proposal and has the opportunity to offer feedback, or organizations may allow teams to weigh in on features without getting input from the vendor itself.
4. Negotiate the contract
Once the decision has been made to go with a specific vendor, the next step is to negotiate the contract. This will involve discussing the specific features and benefits of the service, as well as the price. If the price is fixed, this may be irrelevant. However, for larger contracts, price may vary significantly based on the contract terms agreed. In fact, smart buyers often use contractual levers to reduce pricing.
Having a great contract for your organisation can make all the difference. Your ROI for your subscription could end up being one of the most valuable investments you make. However, a bad contract negotiation can lock you into an ongoing payment you don’t want that leaves a bitter taste in your mouth. The best contract negotiation can set the tone for your entire relationship and experience with the SaaS vendor in the future, so it’s extremely important to get it right.
Quolum has a team of dedicated software buying experts, who have bought over USD 1 billion in software. They can even help negotiate the best prices and terms for your SaaS subscriptions by leveraging spending data and insights from our platform. If you’d like to avoid making expensive mistakes, talk to a savings expert now.
5. Implement the service
Once the contract has been agreed to, the service will be implemented and tested. Any additional questions or issues that may have arisen during negotiations will be resolved. During this stage of the process, teams should evaluate the effectiveness of the service and whether the value-for-money proposition is worth it for the company.
6. Monitor and manage the service
Once the service is live, it will need to be monitored and managed. This will involve keeping an eye on the contract terms, as well as ensuring that the service is meeting the needs of the organization. If there are any major changes or updates to the product, the procurement process will need to be repeated.
The Quolum SaaS Management platform can automate this for you. We handle this by notifying teams of any important changes as well as provide you with data on your team’s usage of the tool so you can easily identify and cut subscriptions that you’re not using.
7. Decide whether to renew or terminate
If the service has been live for a while and tested by the team completely, there will come a time when you need to decide whether to renew or terminate it. This decision will be based on the performance of the service, as well as the budget and needs of the organization. As previously mentioned, the procurement process should include a formal review process that is used across the entire organization.
Top reasons why should you outsource SaaS procurement:
There are a few reasons why outsourcing SaaS procurement is often the best solution.
- Business Growth Opportunity Cost When a company outsources its SaaS procurement, it can focus on other parts of its business. This means that the procurement process can be managed more efficiently and that the vendor selection process can be accelerated.
- Reduced Risk Procurement outsourcing can also help to reduce the risk of entering into a bad contract with a vendor. The company can bring in an “external” solution to help with the contract negotiations, as well as with the subsequent management and monitoring of the service.
- Cost Management Outsourcing helps reduce the cost of the procurement process because the company can outsource contract review, negotiation, and management to an experienced provider.
- Speed Plus, bringing in a vendor who has expertise and experience in procurement significantly speeds up the process of implementing a new SaaS service.
The Most Common SaaS Procurement Mistakes
There are a few common mistakes that organizations make when it comes to SaaS procurement.
| Mistake #1 | The first mistake is not properly evaluating the available options. Often, organizations will only look at the current or most used vendors in the market, without considering any new or unproven options. This can result in a Purchase Order being placed with the wrong vendor or a service that is not fit for the organization’s needs. |
| Mistake #2 | The second mistake is not properly vetting the vendor. Often, organizations will only look at the price of a service without properly evaluating its quality. This can lead to a contract being signed with a vendor that is not up to the standards of the organization. |
| Mistake #3 | The next common mistake is not properly negotiating SaaS contracts. Often, organizations will rush through contract negotiations without properly taking into account the specific needs of the organization. Service issues and contract issues are bound to come up, especially around renewals and optional negotiations. |
| Mistake #4 | The last common mistake is not properly renewing or terminating the service on time. Often, organizations will not properly take into account the performance of the service or the budget of the organization. This can result in the service being extended without proper justification, or the service being terminated prematurely. In fact, most companies simply don’t have the resources or capabilities to accurately evaluate their SaaS usage. As a result, they end up overpaying for the software they don’t need. |
By tracking spending and monitoring performance all in one place with Quolum’s SaaS management software, organizations reduce the risk of missing key information that might lead to decisions about renewals or terminations and can save 30% of their SaaS costs just by signing up for Quolum.
Saas Procurement Best Practices
While the procurement process can be made straightforward thanks to SaaS procurement and management tools like Quolum, there are a few things that organizations can do to perfect their SaaS procurement process.
Get the right size subscription
It’s never a good thing to pay for more than you need, and this is especially true when it comes to SaaS subscriptions. Unless the organization has a very specific need for a certain SaaS product, it’s often best to stick to the smallest subscription that will meet the organization’s needs. This way, your organization won’t be overpaying for a product that it won’t use or that won’t be helpful. A
At Quolum, we have seen customers overpay for 50% seats or more (often in hypergrowth startups). We’ve seen cases of only 47 logins from 98 Asana seats, as well as massively under-used Miro and Salesforce licenses.
Align business goals to each subscription
This step is important because it ensures that the subscription is being used in the most effective way possible. If the organization has goals such as increasing efficiency or reducing costs, it’s important to make sure that the subscription is chosen in a way that supports those goals.
Understand the ins and outs of contracts
When it comes to contracts, it’s important to understand the specific terms of each one. This is especially important when it comes to long-term contracts, as it can be difficult to know exactly what you’re getting yourself into. Quolum’s experts can help you understand more about your contracts and know how to get the terms that deliver the highest ROI.
Take advantage of free trials
One of the best ways to learn about a product is to try it out for free. This is why many SaaS products offer free trials that allow users to try out the service before they commit to a subscription. This way, the organization can decide if the product is right for them without having to spend money on something that they may not use.
How a SaaS Procurement Expert Helps
A sophisticated SaaS procurement and management software that can handle every SaaS need your organization will ever have. Most importantly, your procurement process won’t drain resources from your company, and spending can be managed at a granular level like never before.
Once your team evaluates options, Quolum can handle all payments, license monitoring, negotiation, and more. Your teams will also be able to use the Quolum SaaS card for all SaaS billing, which will both increase security and simplify tracking and record-keeping for the finance department. You will then be able to track all SaaS spending in the Quolum SaaS management platform to see where your SaaS spend is going, and how to optimize it further.
When you need to renegotiate contracts, our team of experts can help you negotiate the terms and pricing that works best for you by leveraging deep spending data from spending on the SaaS Card.
Talk to a savings expert today and put your SaaS procurement process on autopilot.
Frequently Asked Questions
What are some of the benefits of outsourcing SaaS procurement?
Some of the benefits of outsourcing SaaS procurement include the following:
- Less time spent on the procurement process by leadership
- Cost savings from expert negotiations
- Reduced risk of entering into a bad contract with a vendor.
- More efficient procurement process due to the use of an experienced provider.
- Faster implementation of a new SaaS service
Who should be in charge of SaaS procurement?
Internal teams should not be spending time and resources on SaaS procurement. A SaaS procurement solution is a much better alternative. A third-party managed procurement process is both time and cost efficient.
How can I get the most out of my SaaS procurement process?
There are a few things that you can do to get the most out of your SaaS procurement process:
- Evaluate the options carefully before making a decision.
- Use a SaaS procurement solution to help speed up the process of procurement and implementation.
- Take advantage of the free trials offered by SaaS vendors to test the product before making a commitment.
- Monitor and manage the service after it’s been implemented to ensure that it meets the needs of the organization.