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Teams that rely on several software as a service (SaaS) tools may find SaaS procurement to be a tedious and paperwork-heavy process. However, if managed efficiently, this process can help eliminate underutilized or redundant apps and ultimately cut costs. This blog will cover the best practices for SaaS procurement and common pitfalls to avoid.
What Is SaaS Procurement?
SaaS procurement is the process of evaluating, selecting, and purchasing SaaS tools and vendors for your organization. The evaluation and selection process may be based on your organization’s security, compliance, productivity, and pricing needs, among other factors.
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 70% of the buying process before engaging a vendor.
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.
The 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.
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 — for example, what integrations might be necessary with this new tool? Other questions to ask yourself when determining your objectives include “What specific challenges do I need to address?” 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.
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 with you 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. This includes responsiveness, technical assistance, and issue resolution. It’s essential to choose a dependable vendor for a long-term partnership.
Right-Size your Subscription
Investing in the appropriate subscription size is crucial. Often, companies miscalculate their software requirements, resulting in employee dissatisfaction or avoidable costs. After your initial purchase, we recommend you evaluate your SaaS tools periodically to ensure they still meet your needs.
Get Quotes
After your research, reach out to the top three to five potential providers to get a better sense for the tool’s fit in your environment and its associated costs. Ask for demos, trial periods, and quotes. Remember to sign NDAs for your trial process and customize your experience as much as possible to better understand that tool.
Tip: a virtual machine is a great way to test out a tool without making changes to your environment.
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
Establish a procurement timeline to ensure the process is neither rushed nor excessively prolonged. An often overlooked — but critical — 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 evidence from vendors that demonstrates that the software can grow with their company. This foresight prevents organizations from 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 comparisons of various vendors. This strategy enables organizations to find the most suitable vendor by 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.
SaaS Procurement FAQs
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.
How Much Are Your IT Tools Really Costing You?Total cost of ownership (TCO) is the calculation of everything it takes to operate a solution in your environment — and, often, it’s more than you think. Calculating the TCO of your solutions — and potential new ones you’re considering — can help you make better SaaS procurement decisions going forward. Learn more about TCO and how to calculate it in our blog.
