The global software-as-a-service (SaaS) industry, a key player in the cloud market, was valued at $130 billion in 2021. By 2028, that number is expected to skyrocket over 5x to $716 billion, indicating a tremendous opportunity for cost savings through effective procurement. Understanding the typical SaaS procurement process is essential in order to make the most of these savings.

As organizations grow their SaaS app adoption and usage, the implementation of SaaS procurement solutions becomes crucial because upgrading from ad hoc buying processes to modern subscription management leads to significant improvements in overall spend reduction and control.

Let's dive into the complexities of the typical SaaS procurement process and cover some of the most common SaaS procurement mistakes we've seen over thousands of contract negotiations.

What is SaaS procurement?

SaaS procurement refers to the process of choosing the right SaaS tools and SaaS vendors for your organization, assessing their compliance and security standards, and implementing them properly. 

Procurement often occurs ad hoc with employees on different teams making their own SaaS purchases for licenses (think a marketer buying her own CRM), but as a company and its team grows, this strategy becomes inefficient across larger teams with hundreds of different SaaS tools and contracts.

The process of SaaS procurement became more commonplace as SaaS apps have overtaken on-premise solutions. A successful SaaS procurement process ensures organizations find the right tools for their needs and properly vet the subscriptions before implementing them in day-to-day operations.

What is a SaaS procurement solution?

A SaaS procurement solution or a SaaS vendor management platform is a service, platform, or tool that assists users in managing SaaS app contracts, licenses, negotiations, renewals, and more.

The best SaaS procurement solutions help your company team save time during the negotiation process, manage SaaS spend effectively, and potentially secure more cost-friendly contracts for your technology investments.

For instance, a SaaS platform like Sastrify offers a cloud-based procurement software specifically designed for managing SaaS subscriptions.

What is the SaaS procurement process?

The SaaS procurement process, distinct from traditional procurement, has four key stages:

1. Planning & Partnering

The process begins with the generation of strategic ideas to enable business goals. This involves planning for procure-to-pay subscription activities.

A critical step at this stage of the SaaS procurement process is to identify the specific business needs that the SaaS solution will fulfil, and an extensive understanding of your organization's current processes, gaps in functionality, and business requirements is vital.

2. Source to Contract

At this stage, you will be defining business requirements, engaging the market using methods like RFP, RFQ, RFI, etc., and selecting potential SaaS vendors. Commercial negotiations and contracting also fall under this stage.

It involves exploring many SaaS solutions and analyzing their features, costs, customer service, and other significant factors. The goal here is to find the best solution that fits your organization's needs and purposes.

3. SRM & Contract Management

The next stage involves managing contracts, administering and executing contracts, and managing SaaS vendor relationships. Once you've selected a suitable SaaS solution and vendor, the next step is to ensure that the SaaS tool is implemented properly and the vendor relationship is maintained effectively.

In the long run, this stage is essential for maintaining strong vendor relationships and ensuring the optimal performance of your SaaS solutions.

4. Requisition to Pay

This final stage involves completing subscription purchase requisitions/orders and invoicing. After the contract has been negotiated and agreed upon, you can proceed with the implementation of the SaaS solution.

This part of the SaaS procurement process includes setting up user accounts, securely transferring data, and training staff on the proper use of the new system.

Beyond these core stages, the SaaS procurement process should also include diligent management of the service. Regular monitoring of data backups, user activity, and system performance can help maintain control over your IT infrastructure and preempt potential issues.

What is e-procurement?

E-procurement, becoming increasingly prevalent in the current technology landscape, is a business-to-business (B2B) process where companies buy and sell goods and services via the internet.

This procurement method encompasses SaaS procurement and other types of e-procurement and is particularly relevant to businesses striving for a more efficient procurement process and better inventory management. 

What’s the difference between procurement and purchasing?

It’s common for the terms “procurement” and “purchasing” to be used interchangeably, but they’re not synonymous. For starters, let’s cover some quick definitions:

• Procurement: “the process by which an organization buys the products or services it needs from other organizations.” This refers to a company’s multistep, strategic process to acquire goods and services before creating a purchase order.

• Purchasing: “the activity of buying supplies for a company.” Purchasing covers the actual buying process activities such as ordering, expediting, and paying suppliers. There may be some research involved before choosing a product or service, but a formal process doesn’t exist.

The difference between procurement vs. purchasing comes down to this: Procurement covers the full, end-to-end process – pre, during, and post – of procuring goods and services. Purchasing refers only to the activity of actually buying goods and services.

Procurement is the pre, during, and post-process of goods and services. Purchasing is the activity of buying goods and services. Procurement is a big umbrella term and purchasing is just one aspect of its wider function and broader process.

In many ways, procurement and purchasing need each other for a well-rounded organization and strategy.

Often, in early stages of a company's growth, many people do SaaS procurement – for example, the marketing department buying a CRM. As the company team grows, it's important to centralize procurement for subscriptions to ensure efficiencies and optimal pricing.

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What are some common SaaS procurement mistakes?

SaaS procurement holds immense potential benefits for organizations, but it also comes with a unique set of challenges. Often, organizations end up making similar mistakes when investing in software as a service.

Here are some of the most common SaaS procurement mistakes along with tips to ensure a smoother and more efficient SaaS procurement process:

1. Moving too fast (or too slow)

The SaaS procurement process is a delicate balance between speed and accuracy. While moving too slowly may lead to missed opportunities, haste can result in careless mistakes.

Organizations need to establish an optimal timeline for their SaaS procurement process, ensuring it's neither too rushed nor overly drawn out.

2. Declining to shop around

An effective SaaS procurement process involves shopping around and thoroughly comparing various alternatives.

This strategy enables organizations to find vendors who offer an optimal mix of customer service level, favorable pricing structure, and features that align with their specific needs.

3. Not pushing for a pre-purchase test

Numerous vendors offer a pre-purchase test, allowing organizations to evaluate the software's fit before finalizing the purchase.

It's essential not to shy away from requesting this trial as it can prevent costly mistakes and save resources over the long term.

4. Ignoring hidden costs

SaaS solutions entail various potential costs, both upfront and concealed. These may include expenses related to training, implementation, data migration, and more.

By being aware of these hidden costs, organizations can make informed decisions about their IT investments.

5. Focusing on the wrong information

When evaluating SaaS options, organizations should focus on the solution's features and benefits, rather than just the price. Bargain solutions may lack vital features, making them less suitable for long-term investments.

Taking into account all aspects of the software can prevent expensive mistakes in the future.

6. Buying too soon

Organizations need to be patient when choosing the right SaaS solution. Rather than rushing the purchase, it's crucial to research the vendor, consider budgets, trial the product if possible, and compare all features and benefits before signing any contracts.

7. Accepting off-the-shelf pricing

Rather than simply accepting the off-the-shelf prices, organizations should seek bespoke pricing options that align with their unique needs.

This approach could result in substantial savings and maximize the value derived from their IT investments.

8. Dismissing ROI

One effective way to assess different SaaS solutions is by estimating the expected return on investment (ROI). Instead of merely focusing on the price tag, organizations should consider the time saved, costs avoided, and other potential benefits to accurately gauge a solution's value.

9. Making purchases in silos

Successful SaaS procurement requires the collaboration of all stakeholders, including IT departments, business units, and senior management.

Collective decision-making ensures that the chosen solution meets the needs of all users and contributes to organizational effectiveness and efficiency.

10. Failing to ensure proper implementation

The significance of successful implementation should not be underestimated. Ensuring proper training for users, regular follow-ups with vendors, and thorough checks of system functionality can maximize the returns from SaaS investments.

Neglecting this step may result in improper implementation, thereby losing out on the potential benefits of the selected software.

11. Assuming scalability without proof

It's a common misstep for organizations to assume that a chosen SaaS solution will seamlessly scale with their growth, without seeking substantial evidence or assurance from the vendor.

Always ask for demonstrable examples of how the product has scaled with other clients to avoid getting stuck with a solution that doesn't match your organization's growth trajectory.

12. Leaving key stakeholders (i.e. users) out of the process

One crucial but often overlooked aspect of a successful SaaS procurement process is the inclusion of key stakeholders, especially the end-users, in the procurement process. Their input and feedback are invaluable in selecting a solution that truly meets the organization's needs.

Ignoring this step could lead to purchasing software that isn't fully adopted or appreciated by those who use it most.

13. Skipping training & onboarding

Another common pitfall is neglecting the importance of training and onboarding when procuring a new SaaS solution. Without proper understanding and familiarity with the tool, users are less likely to use it effectively, leading to suboptimal utilization and potential loss of investment.

Ensure that your vendor provides adequate resources or services for training and onboarding.

14. Forgetting about tool upgrades

Finally, organizations often forget to factor in tool upgrades during SaaS procurement. Software is not static, and updates or upgrades are necessary to stay competitive and secure. Ignoring this could lead to additional, unexpected costs in the future.

Always discuss with vendors about how upgrades are handled and any associated costs.

If you're interested in more resources for getting the best procurement insights, here are 23 of the top thought leaders you can follow to learn more.

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Should you outsource SaaS procurement?

SaaS procurement can require a lot of time and effort, especially as organizations scale. While you could definitely create a team to handle these subscriptions internally, many businesses that use SaaS apps will choose to get help from a SaaS procurement platform to ease the day-to-day operations their finance, IT and procurement departments.

The right procurement SaaS solution can create a seamless procurement process for entire companies, from onboarding and purchasing to data security and renewal monitoring.

Business leaders need SaaS transparency over all their subscriptions and a procurement solution can provide that. Here are 5 reasons companies choose to outsource SaaS procurement:

1. Save time  

The SaaS job is never complete, with new tools popping up, auto-renewals, and re-negotiations to think about. Outsourcing SaaS solutions to an expert team leaves you, your IT team, and your in-house experts time to focus on core business activities.

2. Faster deployment

Outsourcing procurement allows your company to test and deploy SaaS apps as fast as possible to hit your targets, leading to better ROI.

3. Streamline operations

There are countless moving parts when it comes to SaaS procurement and deployment, all of which require time, money, and expertise. SaaS solutions can ensure all processes are as efficient and effective as possible.

4. Lower costs  

SaaS procurement can be expensive, especially if your employees aren’t well-versed in the process. Bringing on a solution with access to huge data pools and extensive experience will give you the leverage you need with SaaS vendors on costs, enabling you to get SaaS tools and licenses at ideal price points with minimal risk.‍

5. Increase flexibility & scalability

Leveraging a SaaS procurement solution means someone else procures, deploys, and most importantly, negotiates agreements with vendors and manages your SaaS licenses for your company. This can improve the flexibility and scalability of not only each SaaS tool, but your organization team as a whole.