Step-by-Step Software Procurement Process
Was there ever a time when your software procurement process went without a plan?
If it did, we can instantly conclude that it was a catastrophe.
The situation is similar to wandering blindly through a new city without a map. It is time-consuming, eats energy, and requires money. So no wonder it rings a bell when businesses say that software procurement comes at a cost.
But it doesn't have to!
In this blog post, Spendflo will take you through the nooks and corners of the software procurement process. Take control of your next software search with this helpful guide. From understanding your needs to researching products and taking demos of the best ones, this complete guide will make SaaS purchasing more effortless than ever.
What Is a SaaS Procurement Process?
SaaS procurement is the process of purchasing software as a service. It involves handling, managing, and deploying software systems with the help of an independent third-party provider.
The SaaS procurement process involves various steps, such as:
- Identifying and understanding the business needs
- Researching the market for suitable SaaS solutions
- Assessing vendor capabilities and compatibility with existing systems
- Negotiating pricing models, costs, and contracts
- Onboarding users and data securely
- Deploying the software product to all users
- Providing training and support to ensure successful adoption
- Measuring the success of the product by evaluating its performance
These steps must be completed with great precision as they ensure a strong return on investment. What’s more, these steps can vary for different types of software products. Therefore, a detailed understanding of the process is a must.
What Makes a Modern Procurement Process?
A few years ago, shoppers had to purchase CDs containing the software pre-installed for whatever purpose physically. But ever since then, the advent of software-as-a-service (SaaS) products has revolutionized how users get the necessary technology - providing them with instant cloud implementation. But it's no secret that the SaaS industry has grown exponentially in recent years.
Research shows an incredible SaaS procurement growth of 500% since 2014.
And guess what?
The trend isn't about to plateau any time soon either – Gartner predicts businesses will spend a staggering $195 billion dollars on SaaS by 2023, a 17% increase on 2022's already expansive total of $167 billion.
Clearly, it's an exciting time for this dynamic and flourishing sector!
SaaS is making tremendous advances!
The traditional procurement method is based on the same fundamental ideas.
- The significant distinction many firms face today is manual, paper-based operations.
- An IT ecosystem shaped conventional procurement with few product options and a few vendors dominating the market.
- Businesses frequently onboarded a vendor before determining which products to purchase, relying on Oracle, Microsoft, and SAP product suites.
The proliferation of SaaS tools and remote labor has rendered manual procurement obsolete. The volume of purchases and permits required to run a contemporary firm makes it difficult to keep up. It is not an issue of raising the number of employees. It overwhelms the accounts payable team's ability, even in a small organization.
On the other hand, paper-driven procurement has a negative impact on a company's bottom line. Here’s how:
- Human inefficiencies cost businesses a lot of money through delayed purchase cycles, lost discounts, and transaction conflicts.
- Attempting to accelerate procurement procedures with antiquated methods such as spreadsheets and emails is akin to igniting a microwave with steel and charcoal.
Firms must abandon antiquated procurement procedures and embrace new solutions to take advantage of prospective purchase and payment reductions. One effective method is to automate your purchase process. It has a slew of advantages. Modern procurement tools can instantly change a painfully sluggish procurement approach into a world-class procurement plan.
If your procurement process still uses antiquated tools, it's time for a substantial technological overhaul. Spendflo is one such software that can help you heal the SaaS procurement potholes of the organization.
What’s the Difference Between Indirect, Direct, and Services Procurement?
Direct, indirect, and services procurement are subsets of the overall procurement process that differ in definition, assignment, and other factors. As per reports, the global procurement software market was valued at USD 5.78 billion in 2020 and is predicted to reach USD 10.29 billion by 2028. Therefore, stakeholders can take appropriate measures to meet their demands if they look closely at the differences between these procedures and understand what they entail.
Direct Procurement is acquiring raw materials, parts, or components to produce a product. These materials are frequently found in the finished product for customers. These purchases are typically made in bulk from a pool of providers at the highest feasible price, quality, and dependability.
To decipher some examples of direct procurement are:
1. baker buying flour to make bread and other bakery goods
2. construction business buying cement in bulk for a construction project
3. fabric factory ordering cloth materials and textiles to sew orders
Indirect Procurement is acquiring products, services, supplies, and materials required to keep the firm working daily. One approach to categorizing indirect procurement is to say that it does not contribute to a company's bottom line. Indirect procurement includes fixing equipment, purchasing office supplies, servicing, travel, or other activities.
To decipher, some examples of indirect procurement are SaaS tools like
Service Procurement is the process of recruiting (and managing) service providers who supply people-based services to a company, such as technical consulting firms, specialty service agencies, or maintenance firms.
Some examples of service procurement businesses are
Steps Involved in a Software Procurement Process
The software procurement process includes six distinct steps. To make the process smoother, each step must be completed in order.
Step 1: Determine your company's requirements
Before you can even evaluate providers, you must first describe the problem you're attempting to solve and your precise requirements. Maybe your HR software requires an upgrade, or you're seeking software that can automate and optimize unproductive procedures. Conceivably you must invest in new contact center software to improve customer service and retention and whatnot!
In many cases, the issue you're experiencing results from poor processes and insufficient software. Recognizing these difficulties is not a fault-finding activity. It is a chance to look at challenges in a new light. Spend time with the impacted teams to understand the issues from their viewpoint and how critical a resolution is.
Step 2: Get stakeholder support and participation
Before you can begin narrowing down software businesses to evaluate, you must first identify all of your stakeholders. Consider the following:
A. The End Users
The team members will interact with the product daily. Ensure that each area that will be impacted is represented to select the appropriate software.
B. Experts in their fields: People in your department or firm who understand the project and its implications for the company.
C. Decision-makers: The individuals who must sign off on the decision. To secure the necessary resources, they must agree.
D. IT: Most goods require technical support from your IT department, such as knowing platforms, integration points, data flow, and other aspects.
After identifying your stakeholders, build a technology buying team by selecting a software buyer from each group. This committee is in charge of assessing software providers. They also ensure that the company's hardware can support the new technology throughout the software procurement process.
If your organization is large, the group may contain five or more decision-makers, each with differing levels of influence and requirements that must be handled. As you begin asking questions, you will discover that there are participants whose demands should be addressed sooner rather than later.
Step 3: Establish your budget
Examine your budget and determine whether you have enough money to satisfy your needs before filing a purchase request or purchase order for the software purchasing procedure. You may need to rethink your spending in other areas, but fitting the acquisition into your budget is the most straightforward option.
You'll have to find it elsewhere if you are short of money. Investigate the projected annual budgets with heads of departments and C-level executives to see where your company represents monetarily.
Step 4: Look into potential vendors
- You can employ several strategies to locate and research the finest software solutions and vendors.
- You can request references from other businesses that are similar to yours.
- Alternatively, you might rely on the wealth of knowledge available on the internet.
Individuals with unfavorable experiences are more likely to communicate their negative feelings online. Finding this type of feedback can assist you in rapidly narrowing your list of potential vendors.
You can also filter your search according to the kind of software, your functionality needs, and the budget you established in the previous phases. In such overwhelming cases, ask yourself these questions:
- Do you want a ready-to-use product off the shelf? Or are you looking for something a little more personalized?
- Which vendors provide products in your price range?
Addressing these variables at the start of your research process can help you immediately exclude some providers, focusing your search and allowing you to locate more accurate possibilities.
Step 5: Examine your vendor shortlist
You're now ready to start reviewing the vendors on your shortlist.
If your company requires it, now is the time to issue a request for proposal (RFP). The objective of an RFP is to solicit bids from suppliers who meet your project specifications and to begin determining which of these suppliers is the best alternative.
It's critical to remember why you're seeking a new supplier when you conduct your vendor review. Recall the problem from step one and the intended future state from step two. Remember this when you begin to evaluate each vendor.
Step 6: Request demonstrations
Product demos are your chance to assess features, decide how user-friendly the software is, and obtain the greatest knowledge of how each vendor will perform within your organization when purchasing software. It is important to note that before scheduling a demo, you should chat with the vendor to ensure that your company is a good fit for their technology.
- Consider presenting the vendors with an overview of your existing operations,
- planned future growth, and
- multiple use cases for the product to ensure you get the most out of each demo.
This will almost yield thorough useful responses, allowing you to compare each vendor's presentation based on how they addressed your questions.
One of the ideal methods to guarantee the demo is valuable – and to avoid being sidetracked by the vendor's marketing pitch – is to present the vendor with a real problem you are experiencing and ask them how their software products will address it. Likewise, consider asking the seller to demonstrate how it will handle future issues.
You should also use the demonstrations to:
- Understand better how the vendor will fit into your firm's culture.
- If you run a fast-paced firm with staff who work more than the typical number of hours, you won't want to work with a calmer vendor available from 9 AM to 5 PM
- If you liked the presentation, you may request a free trial with Spendflo to test accessibility, features, and benefits.
Step 7: Make your final purchasing selection
You may finally make an informed selection using the information you obtained over the first 6 stages of the software purchasing process. You must reduce your emotions and disregard any potential political positioning at this step to make a decision that gives the most value and is in the best interests of your company.
You must notify the suppliers that you did not choose and that you have made a decision and are going forward with another option. These encounters should be complementary and respectful. If your present pick does not work out, you do not want to rule out the potential of working with these vendors in the future.
How to Optimize Your Procurement Process?
A streamlined procurement process allows for greater control at all stages of the procurement lifecycle. Here are some steps you may take to improve your procurement process.
Step 1: Get good procurement software
To begin with, you will need good procurement software to help you manage the various stages of the process. Software like Spendflo is specifically designed for the procurement process. It helps streamline the process by simplifying the management and tracking of vendors, quotes/proposals, requisitions, contracts, purchase orders, and invoices.
Step 2: Through training, you can ensure rapid staff uptake
Another way to ensure the process runs smoothly is to provide rigorous training for staff at all levels. This will help your team understand the different stages of the procurement process and how they can contribute. By having a well-trained team, you can be sure that everyone is up-to-date on best practices and processes.
Step 3: Establish a clear buying plan
Having a clear buying plan can help you ensure that the process runs smoothly, with minimal delays and complications. A comprehensive and detailed buying plan clarifies the process, assisting decision-makers to make informed decisions quickly.
Step 4: Assess your costs and plan accordingly
It’s crucial to assess costs at the earliest stages of the process and plan accordingly. This will help you manage budgets more effectively, identify cost-saving opportunities, and determine whether certain products and services are necessary.
Step 5: Ensure that all contracts and legalities are in order
Finally, ensuring all contracts and legalities are in order before signing agreements is important. This will help protect both parties involved and minimize the risk of legal issues arising further down the line. These simple steps can optimize your procurement process for maximum efficiency and cost savings. Doing so will help your business to be more competitive and cost-effective. The software purchasing process is an important part of any business. To ensure a successful.
Step 6: Establish an open line of communication with your vendors
Establishing an open line of communication with your vendors is also important for ensuring a successful procurement process. This will allow you to quickly manage any issues or concerns and provide feedback on how the process runs. Additionally, it will enable both parties to be more transparent about their expectations, reducing the risk of miscommunication or misunderstandings.
Step 7: Incorporate APIs into your procurement procedures
Finally, you should consider incorporating APIs into your procurement procedures. APIs allow direct integration with vendors and suppliers, enabling faster communication and quicker transactions. This can help to streamline processes and reduce costs significantly.
Step 8: Ensure policy and process compliance
It is also important to ensure policy and process compliance with both internal and external regulatory bodies. This will help reduce the risk of non-compliant practices impacting your procurement process. Having policies in place that are regularly reviewed and updated can help ensure that all processes are compliant with laws and regulations.
5 Top Best Practices for Building a Transformational Procurement Process
Developing a best-in-class procurement approach necessitates careful planning and attention to detail.
What is the payoff?
A procurement department and a streamlined process. They use cutting-edge technology to leave busy tasks behind and promote value development.
Increasing the effectiveness of your procurement process has a ripple effect across your firm. A world-class procurement organization's aims go beyond the traditional idea (procurement's principal duty is to get goods and services in response to internal needs). An effective procurement process seeks to optimize the entire process to generate significant economic value.
There are several approaches to improving the procurement process; some are simple modifications that focus on enhancing a specific aspect of the process, such as:
- providing necessary internal documentation
- potential to overhaul the process completely, and more.
Here are the top five best approaches for developing a transformative procurement process:
1. Create a repeatable procurement procedure
Every purchase in your organization should follow the same procedure. This reduces costly errors, keeps projects on track, and avoids problems. It also lowers or eliminates erratic spending, which can deplete budgets. To explain this process in boxes, here’s a successful approach that Atlassian takes for its business.
Atlassian, a business now reckoned with an evaluation of $22.7 billion, develops solutions such as the JIRA project management tool, HipChat office messaging service, and more. In early 2020 Atlassian announced lifetime sales worth over one billion. They achieved this by implementing an effective procurement process designed for repeatability.
- The Atlassian way of procurement starts with an automated alert system for tracking vendor quotes. This helps them get the latest market prices and quickly compare vendors’ offerings.
- They also rely heavily on competitive bidding, which helps reduce costs by pushing vendors to submit their best quotes. With this system, they can quickly identify which vendor offers the best deal and select them for the task.
- The company follows strict procurement guidelines to ensure fair and transparent purchasing decisions. These include using an approved supplier list, setting exacting requirements for suppliers, creating a detailed request for proposal document, and enforcing a standard set of payment terms.
Overall, Atlassian’s repeatable procurement process enabled them to save costs and increase their efficiency and reliability in the long run. This has helped them become a leader in the collaborative software industry and achieve impressive growth in sales.
By taking a structured approach to procurement, Atlassian has turned it into an efficient system that helps reduce costs and increase overall efficiency.
2. Specify your procurement requirements
Set the table stakes right away. Include them in your purchasing process.
Approvals and fulfillment can be expedited with a cross-departmental agreement on your procurement plan.
3. Use a technology-based dynamic purchasing procedure
Sticking to rules is made easier by technology. These dynamic rules are department, position, budget, and project-specific. It ensures that every purchase choice follows a consistent pattern. To concur, let’s look at Dropbox and how it leveraged modern technology to save its annual marketing budgets.
Since it was established in 2007, Dropbox has significantly expanded its user base through its referral program. Dropbox's success continued with 100 million users by 2012 and an impressive 600 million currently. After becoming public in 2018, Dropbox closed out 2019 with $1.7 billion in revenue. This technology-based dynamic purchasing procedure has been instrumental to the firm’s monumental growth.
Dropbox uses its referral program to give users incentives for sharing the platform. They offer up to 16GB of free space if a user invites 16 other members, which is a great deal for new recruits.
- This program allows Dropbox to increase its user base without spending much on marketing campaigns.
- Additionally, it also rewards existing users for their loyalty.
To ensure that the referral program is working effectively and efficiently, Dropbox has implemented a number of technologies.
- First and foremost, they have created an algorithm to track the effectiveness of their referral program.
- This algorithm builds models based on user data to predict the likelihood of a referred user becoming an active customer.
- This allows Dropbox to target its incentives more accurately while helping them identify bottlenecks in its referral system.
- In addition, Dropbox uses artificial intelligence techniques to personalize its messages to appeal to potential customers.
By leveraging modern technologies and personalizing its messages, Dropbox has driven impressive user growth and revenue over the years.
4. Commit to ongoing supplier relationship enhancement
Suppliers are your best friend when it comes to driving value and minimizing expenses. For improved strategic procurement, cultivate deep ties with a list of suppliers.
5. Avoid costly procurement issues by utilizing technology
In a world of constant layoffs, a SaaS business needs to cut costs without cutting people from the organization. Many startup costs are fixed, like:
- Cloud computing,
- Office space, and
- Associated COGS are hard to touch,
…so employees are the obvious target for CFOs looking to reduce expenses. It may be painful, but it’s variable.
One such example of utilizing technology is Intuit.
Intuit, as the name suggests, believes in 'Intuiting' the direction of the software market by optimizing the best technology and services for its internal operations. The company uses an open platform with an ecosystem exchange reseller model. This is where Intuit opens its reseller network to an ecosystem of third-party products that complement its core platform.
Intuit has implemented machine learning and artificial intelligence technology to host such intricacies to analyze real-time data. This helps them to identify areas where they can save costs by working with the right suppliers and negotiating better contracts. Furthermore, they leverage technology to automate operational processes such as procurement, payment settlement, and inventory management.
How Spendflo Can Monetize Your Software Procurement Process?
Spendflo saves hundreds of hours negotiating SaaS contracts by providing total visibility and assisting you in evaluating, right-sizing, and optimizing them. Spendflo is appropriate for SMBs and enterprises, enabling firms to develop a dynamic procurement management approach that gives them a tactical advantage.
The SaaS industry's pricing is a mystery. You're negotiating in the dark, with no means of knowing if you're paying fair prices. You're devoting time and energy to doing it properly. You may be spending that time on key business procurements. This is where Spendflo can come in, making the process easy and extremely beneficial.
With a comprehensive suite of tools, Spendflo helps companies buy and optimize SaaS software. It comes loaded with a suite of features like:
- product discovery capabilities,
- contract management,
- insights and visualizations,
- vendor trust metrics,
- approval workflows,
- SaaS procurement and more.
As a result, Spendflo provides users with business intelligence while ensuring they get the best price for each purchase.
The procurement process is essential for any company to succeed. Businesses must maintain an effective and efficient purchasing system to make the most of their resources. This blog discusses approaches to optimizing your organization's procurement process: creating a repeatable procedure and utilizing technology.
The correct technology makes creating a contemporary procurement process flow more manageable. Utilizing procurement software reduces manual processes, inconsistencies, and waste spending. It can relieve top-performing team members from manual labor and boost overall productivity.
Spendflo can help you monetize your software procurement process while providing total visibility throughout the negotiation process. Reduce costs, save time, and increase efficiency with Spendflo’s innovative approach to procurement management today. Try it out now! Book a Demo and start saving today.
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