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SaaS Procurement: Best Practices & Common Mistakes

Teams that rely on several Saas tools may find SaaS procurement to be a tedious and paperwork-heavy process. However, if managed efficiently, this process can result in cost-cutting and eliminating underutilized or redundant apps within the organization.

Redundant SaaS applications are tools subscribed to that perform the same business functions as other apps within the same team or across different departments.

To implement a modern SaaS subscription management system safely and successfully, it is necessary to have a good understanding of SaaS procurement, its best practices, and the mistakes that we should avoid.

As per Brex, approximately 30% of company spending goes to "stuff" without a heartbeat.
the increase in SaaS spending per employee in 2023

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What is SaaS Procurement?

SaaS procurement is the process of selecting suitable SaaS tools and vendors for your organization, evaluating their compliance and security standards, and implementing them effectively. To better understand what SaaS Procurement is, the terms SaaS purchasing and SaaS governance must also be defined well. 

The Difference Between SaaS Procurement and SaaS Purchasing

SaaS procurement is the entire process of selecting and implementing a SaaS app, including purchasing. SaaS purchasing is just the specific step of acquiring a product or service by the buyer. 

Buyers complete over 60% of the buying process before engaging a vendor.

SaaS Procurement Vs. SaaS Governance

SaaS Governance refers to policies, procedures, and standards companies use to manage their SaaS applications from procurement to retirement. It ensures adherence to cybersecurity frameworks, privacy, and compliance standards, mitigates risks, and optimizes performance and cost. 

Effective SaaS governance is essential for secure and efficient IT Governance. 

Importance of SaaS Procurement

In the past, procurement teams were responsible for assessing the effectiveness of the purchase process and communicating the results to internal stakeholders for implementation. However, with the advent of the SaaS model, procurement teams need to adapt to keep up with the latest technological advancements, trends, and ever-evolving business requirements.

Today, there are countless SaaS tools, subscription types, and vendors to choose from. This abundance of options gives buyers a significant advantage over sellers. Therefore, it is crucial to have a rigorous selection process to maximize profits while optimizing costs and efficiency. This approach is commonly known as SaaS procurement.

Top 3 Benefits of SaaS Procurement

SaaS Procurement offers numerous benefits to organizations, including scalability, cost efficiency, accessibility, regular updates, rapid implementation, scalable security measures, and a streamlined decision-making process.

  • Scale: One of the significant advantages of SaaS solutions is their scalability, which allows businesses to easily adjust resources, features, and capacity to meet evolving needs and demands. This flexibility is particularly beneficial for growing companies or those experiencing changes in demand.
  • Save: SaaS tools operate on a subscription-based model, making them more cost-efficient than traditional software purchases. The lower initial investment and predictable recurring payments eliminate the need for in-house infrastructure maintenance, resulting in cost savings. Moreover, by adopting a rigorous procurement process, organizations can achieve the best-aligned solution with its best-aligned package, resulting in 100% utilization of the purchased solution.
  • Simplify: SaaS procurement can simplify the purchasing process for software solutions. It often involves straightforward subscription-based models, reducing complex negotiations and minimizing the burden of hardware and software compatibility issues.

SaaS Procurement Best Practices

The process of procuring SaaS solutions can be compared to testing the waters before diving in. You need to have a good understanding of the temperature, depth, and other nuances before committing. This is particularly important when it comes to SaaS procurement. 

Before making a purchase, it is critical to evaluate potential solutions thoroughly. Here are the best practices for SaaS procurement that can help you choose the most suitable vendor for your specific needs:

Define Your Needs and Expectations

Start by outlining your objectives. What problems are you trying to solve with this SaaS solution? Consider your existing tech stack and determine your requirements, mainly if integration is necessary. Ask yourself questions such as "What specific challenges do I need to address?", "Which tools and platforms must integrate with this solution?" and "What features are most critical for my needs?" 

Engage with various departments, particularly those using the tool extensively, to gather insights and form a comprehensive understanding of your needs.

defining needs and expectations in saas procurement

Conduct Thorough Market Research and Make Comparisons 

It's important to remember that popularity doesn't always mean suitability. To find the best product for your needs, you should research all corners of the market, not just the well-known vendors. List potential providers and evaluate them critically based on your defined needs and expectations. Conduct comprehensive market research to identify potential vendors and evaluate their offerings, including features, support, scalability, and pricing structures. Don't leave your future to chance. Consider your growth, evolving needs, and potential obstacles. In this regard: 

  • It is important to choose tools that can scale as your organization grows. You should also assess how easily the tool integrates with your existing systems to ensure seamless data flow and interoperability.
  • Evaluate the vendor's post-implementation support services, including responsiveness, technical assistance, and issue resolution. It's essential to choose a dependable vendor for a long-term partnership.

Right-Size your Subscription

Ensuring that you have invested in the appropriate subscription size is crucial. Often, companies miscalculate their software requirements, resulting in employee dissatisfaction or avoidable costs. It is recommended to evaluate your SaaS tools periodically and emphasize the functions and features you require at a reasonable price.

Try and Get Quotes

After your research, reach out to the top 3 or 5 potential providers, get demos, try tools, and get quotes. Remember to sign NDAs for your trial process and customize your experience as much as possible to better understand that tool.

Be cautious of the Terms and Conditions

It's essential to be diligent when finalizing agreements with SaaS solution providers. Before signing on the dotted line, read the terms and conditions carefully. These provisions govern how end users can access and use the software, including subscription basis, cost, upgrades, and renewals. 

Clear terms and conditions are essential to protect the interests of the organization. This may include provisions related to security, data privacy, support, and other important issues.

Common SaaS Procurement Mistakes

Lack of Proper Workflow

Organizations must establish an optimal timeline, ensuring the process is neither rushed nor excessively prolonged. An often overlooked but crucial aspect of this process is the inclusion of key stakeholders, especially the end-users. Their input is invaluable in selecting a solution that aligns with the organization's needs. By incorporating these perspectives, companies can avoid the pitfall of investing in software that fails to resonate with its primary users.

Not Optimizing the Deal Size and Overlooking the Scalability

A common misstep in SaaS procurement is failing to verify the scalability of the chosen solution. Organizations should seek demonstrable evidence from vendors to ensure the software can grow with the company. This foresight prevents getting trapped with a solution that becomes inadequate over time.

Poor SaaS Vendor Management and Implementation

Effective vendor management and implementation are pivotal. This includes proactive management of renewals and a comprehensive understanding of the SaaS landscape. Successful implementation is more than just the initial setup; it involves thorough user training, regular follow-ups with vendors, and consistent checks of system functionality. This approach maximizes the returns from SaaS investments and prevents the losses associated with improper implementation.

Not Calculating the ROI

When evaluating different SaaS solutions, estimating the expected return on investment (ROI) is crucial. 

ROI, or Return on Investment, refers to the financial and business benefits gained from implementing a software application.

This assessment should go beyond the upfront cost to include considerations like time efficiency, cost avoidance, and other potential operational benefits. A comprehensive ROI analysis helps make a more informed and financially sound decision.

Poor Vendor Research Process

An effective procurement process involves thorough research and comparison of various vendors. This strategy enables organizations to find the most suitable vendor, considering factors like customer service, pricing, and feature alignment with specific needs.

Not Testing

Lastly, the significance of testing cannot be overstated. Many vendors offer pre-purchase trials, allowing organizations to evaluate the software’s fit before deciding. Engaging in these trials can prevent costly mistakes and conserve resources in the long run.

By adopting these refined practices, organizations can avoid common pitfalls in SaaS procurement, leading to more successful and satisfying software investments.

SaaS Procurement Process
SaaS Procurement Process

How Resmo Simplifies SaaS Procurement

Resmo simplifies SaaS procurement by providing insights into your needs, apps and preventing overpaying for extra seats. It provides: 

  • Insights into employee SaaS usage through direct inquiries via ChatOps integrations like Slack or Microsoft Teams, enabling you to identify unnecessary expenditures and receive timely alerts about impending SaaS renewals. This ensures investments are made only in tools that genuinely add value to your organization.
  • A reduction in overspending by removing accounts that are no longer necessary, deduplicating redundant apps, and reclaiming licenses as part of the offboarding process. Resmo provides step-by-step playbooks for efficient SaaS management workflows.
Data deduplication efficiently reduces storage needs by eliminating duplicate data. Extending this principle to software helps combat SaaS sprawl by removing redundant applications that serve overlapping functions. This strategy not only conserves storage but also streamlines software portfolios, cutting costs and simplifying management.

FAQ

What is the procurement process in saas?

The procurement process in saas involves searching for and negotiating with various vendors, comparing different SaaS solutions, defining business needs, and selecting solutions that align with those needs. This process also includes implementing and maintaining the chosen solution.

What are the best practices in procurement?

Best practices in procurement involve a thorough vendor selection process, negotiation and contract management, subscription optimization, and scalability considerations.

How is saas purchased?

In SaaS, users pay a subscription fee to access the software instead of buying a license outright. The experience of buying SaaS can differ depending on the market. Nonetheless, a fundamental and straightforward roadmap applies to every purchase. In SaaS procurement, the organization that intends to use the software typically researches and evaluates various options, negotiates terms and pricing with the vendor, and then purchases a subscription.

How can you avoid common mistakes in purchasing?

To ensure a smooth procurement process when acquiring SaaS products, it is vital to follow the best practices. These practices include effective communication among different departments to identify the specific needs and requirements, conducting extensive research to have a vendor shortlist, and optimizing costs and deal sizes before initiating the contract process. Organizations can avoid common mistakes and select the most suitable SaaS solution by adhering to these best practices.

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