The SaaS model has changed the way businesses perceive IT and has penetrated all levels now. Be it a household name like Microsoft or the rapidly growing startup that is making a name for itself—all have gone SaaS

SaaS is popular mainly due to its flexibility. After all, why wouldn’t you like the freedom to pay for the services you want and only when you want them? 

But SaaS reliance can be a slippery slope. Have too many (necessary or otherwise) SaaS platforms, and you’ll suddenly find your costs skyrocketing. That is something almost all organizations are dealing with since they consider SaaS as one of their top five expenses. 

What if there was a way to avoid the additional costs and focus on improving your business? Suppose you need to do the following:

  • Comprehensive management and analysis of all SaaS expenditure
  • Better negotiations and transparent contracts for key SaaS applications
  • Real-time analysis of the ROI from any SaaS expense
  • Timely license renewals and cancellations for the most optimized processes

The right procurement strategy can help you achieve all this and a lot more.

You can stop worrying about shadow IT expenses, expensive contracts, and tedious negotiations. You can then spend your energy on making processes even better and strive for more efficiency, effectiveness, and overall value generation for your customers.

What is a procurement strategy?

In the simplest terms, procurement is the process of selecting, analyzing, assessing, and finally implementing the right solution for your business. There are multiple approaches to procurement, and the right one depends on the specifics of your business. 

For instance, if you are looking for more scalability, then a cost-effective approach will be counterintuitive. 

Similarly, a business handling sensitive data will always prefer security over flexibility or optimization. 

High-performance SaaS businesses don’t have the time to repeatedly go over their requirements and negotiate deals for the SaaS tools they use. 

Types of procurement strategies

A company’s vision influences its approach to automation, risk management, or procurement outsourcing. It lays the foundation for long-term procurement goals.  

Let’s take a brief look at some procurement strategies, especially for SaaS companies:  

1. Cost reduction

A recent survey we did showed that about 40% of the organizations spend over a million dollars on SaaS and the procurement process may even stretch over 60 days. Imagine how much a dedicated team with the right tools and strategies could achieve with all those resources!

This is why many businesses consider SaaS costs a primary factor in procurement. They have strategies to ensure that seemingly small costs for different SaaS solutions don’t pile up to become a huge problem in the future. 

Learn how Wodify saved money by focusing on reducing its procurement costs.

2. Green purchasing

Sustainable purchases come into play while choosing the right SaaS tool. The sustainability market has one of the highest CAGRs, about 23%, and can reach up to $26 billion by 2026

Much of this investment is going towards green data centers to reduce the overall carbon footprint. Many organizations procuring SaaS solutions place great importance on it due to rising environmental consciousness and resulting regulations in the developed world. 

3. Risk management

The way any organization handles its risks can either make or break them. This is the primary sentiment around this approach as all procurement strategies revolve around identifying, assessing, and then finally reducing the procurement risks for the business. 

4. Total quality management

The main idea behind total quality management (TQM) is how the entire organization combines its efforts toward improving the quality of the existing products and processes. The same approach can help with procurement as it helps determine the overall effect of a particular purchase and how it’ll help in the grander scheme of things for the company. 

5. Vendor management and optimization

We often hear how important spend management is and how businesses can catapult themselves to the top by maximizing their revenues and minimizing their costs. However, spend management alone can take you so far. The next step to success is effectively managing vendors and optimizing the existing processes. 

This can be a great procurement approach for businesses that have been around for a while. They are usually past their turbulent phases and can now focus on improving their processes and moving towards sustainable growth. 

Airmeet saved both time and money by optimizing its SaaS procurement process. Learn how!

10 steps to creating an effective procurement strategy 

What are the steps that can improve your procurement strategy from the beginning? We believe the following will help you get started: 

1. Implement a procurement software

There was a time when spreadsheets were essential for any business because of their comparative automation capabilities. However, there are better alternatives now. 

If you’re a SaaS business, the right SaaS procurement platform can help you streamline all your processes and allow you to maintain effective control over all your operations. Vendor monitoring, budget tracking, and other key operations of the procurement process can be managed well.

Another benefit of using procurement software is efficiency. You can manage your entire procurement process under one roof without needing any additional hardware or software.

2. Analyze organizational spend

The basic requirement for effective procurement strategies is knowledge. You need to know where all your expenses are going and how essential they are. 

Get a grip on your shadow IT expenses and see how essential every purchase is. Strategic spend management enables you to have as much data as possible on organization spending to get a bigger picture. 

3. Determine business needs

Your business doesn’t need every single tool under the sun. Too many SaaS tools can lead to SaaS sprawl. 

Before deciding on the approach, it’s important to address the business case for any particular solution, especially for SaaS. Questions about the expected ROI, business needs, and the overall effects of a particular strategy should be answered.  

4. Assess market conditions

Just like it’s important to determine the business needs, you also need to check the current market situation. This technically is a part of the previous step as a market assessment is a part of the business case. 

For SaaS procurement, a clever way to assess a tool’s compatibility with the market is to look at the pricing structures. You’ll often find multiple SaaS tools competing through the prices they offer and their delivered value.

While there are many ways to study the market effectively, a lot of business leaders rely on the following:

  • Porter’s five forces
  • A PESTEL analysis
  • A SWOT analysis

It’s important to keep in mind that market conditions can change very quickly. So, this is a continuous process and requires you to remain updated all the time. 

5. Set clear objectives

Many businesses set out to do everything all at once. It’s essential to create clear, concise, and realistic objectives based on importance and monitor them through KPIs or any other system that works for you.    

6. Define Procurement Policies

You now have the objectives in your mind along with their business case and desired needs. It’s time to establish clear policies based on those objectives. One of the best ways to set up the best policies is to use an incredible methodology behind SMART goals. 

You must have heard about it. SMART is an acronym that stands for: 

  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Time-bound

With the right strategy in place, you can focus on the grander scheme of things and work on things like procurement automation and reduction of procurement risks

7. Outline a procurement strategy according to your needs

There are hardly any one-size-fits-all strategies or approaches in business. The procurement approach and policies you come up with need to consider the specific intricacies of your business. 

It’s standard in the industry to use specific examples as a case study and base your strategies on that. SaaS procurement is no different, but you have to make sure that whatever you are doing would be the best fit for your business. 

8. Develop a digital procurement strategy

Digital transformation is essential for the survival of any business in the modern world. Especially when we are talking about SaaS, opting for a digital strategy no longer remains optional. 

9. Execute, manage, and refine the strategy

Policies or strategies we develop are not set in stone. Modern businesses are dynamic, and it’s imperative to iteratively improve everything and optimize the existing processes for continuous performance.

Final strategy: Let Spendflo handle SaaS procurement

Spendflo helps you save up to 30% of your SaaS costs through unrivaled techniques that will automate your processes, curb shadow IT, and give you effective control over your IT budget. 

We offer multiple services ranging from assisted buying to vendor analysis, contract management, and automated approvals. We have helped improve our partners’ ROI to 15x through process optimization, better contract management, and tailored suggestions for better SaaS alternatives. 

Interested in improving your SaaS ROI? Get a free analysis today!

Ajay Ramamoorthy
Product Marketer
Rohitth Padmanabhan
Product Designer
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Here's what the average Spendflo user saves annually:
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