A Step-by-Step Category Management Guide for SaaS & Software Procurement

You want to maximize the value of your existing tech stack by ensuring you have the features you need at the right price. However, it's easy to end up with redundant tools, paying too much, and still unsure whether you need additional tools to address your operational requirements. 

So, how can you ensure you’re making the right choices throughout the SaaS procurement process? 

In this article, we discuss how to optimize your tech stack by enhancing SaaS procurement with category management best practices, and share tips on implementing these strategies for your business.

Understanding category management for SaaS & software spending

Category management is a strategic approach to purchasing goods or services that involves grouping segments of procurement spend. SaaS category management categorizes software based on factors like use cases or functions to select products that can help your business achieve key goals.

For example, you can categorize SaaS tools based on the following categories:

• Marketing software
• Sales pipeline software
• Customer support software
• HR software
• DevOps software
• Project management software

You can use category management best practices to better define your tech stack needs, reduce SaaS spend, and resolve common challenges in SaaS management, which we look at below. 

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Difficulties in managing SaaS & software categories

Without a dedicated solution to managing your SaaS subscriptions, you can easily overpay for features that give you limited value, and, if you run into one of these following challenges, you’re not alone.

1. Managing subscriptions & renewals

Tech stacks are complex to manage, and it becomes more complicated as you want to upgrade, downgrade, or completely change a particular tool once the contract comes to an end. It’s easy to lose track of when renewals are due or of how a tool’s functionality has evolved, making it difficult to adopt new solutions at the right time.

2. Lack of centralized data and reporting 

Most businesses have multiple SaaS products within the same category. Without effective integration, this creates data silos, making it difficult for you to efficiently access or accurately visualize data.

3. Overlapping functionalities and redundant tools 

Complex tech stacks can also lead to redundancy, where you have multiple tools with similar functionality. Ideally, you’ll be able to consolidate these into a single source of truth.

How category management can benefit your company

Whether you already have a complex tech stack or you’re building one from scratch, category management offers multiple advantages that can help you better manage your systems while saving on costs. 

Cost-savings on SaaS spend

Category management helps you identify redundancies in your software tools. With better insights into platform capability and usage, you can consolidate functions and lower monthly costs.

Visibility & control over SaaS spend

You can use category management best practices to efficiently review existing and anticipated SaaS contracts, accurately tracking current spend, upcoming renewals, and price fluctuations across your entire product mix.

Insight for contract negotiations & renewals

With a clear understanding of your business’s needs and industry pricing benchmarks, you’ll be well-prepared for contract negotiations and renewals. This knowledge enables you to ask for the right prices and potentially secure better deals by investing in consolidated solutions.

Streamlined procurement processes

Organizing software tools into clear categories facilitates quicker approval from multiple stakeholders. For example, Vendr’s workflows, which include purchase request forms and transparency-focused approval processes, leverage category management principles to accelerate procurement. 

Data-driven decision-making for software acquisitions

Pricing benchmarks and increased visibility into your SaaS spend helps you make better decisions regarding software acquisitions. Consider factors like supplier performance, required features, and industry pricing to make smart buying choices that provide you with the complete tech stack you need.

Improved risk management 

The larger your tech stack, the more vulnerable your business can become to digital risk. Carefully selecting secure tools and consolidating your tech stack through category management can mitigate this risk.

An overview of the category management process for SaaS spending

Here are seven steps you can take to streamline your SaaS and software procurement process: 

1. Define your categories 

Map out the categories of software that you have or plan to acquire.

Consider which teams will use each platform. For example, project management tools used primarily by the development team should be categorized under Development rather than Operations.

2. Categorize existing suppliers and analyze by spend, criticality & performance

Assess your existing tech stack, sorting existing suppliers into each category. Make use of data analysis and category insights, assessing KPIs and metrics to determine the following:

• The cost of each individual tool
• The features of each tool and the importance of those functions
• Supplier performance and reliability, indicating how well the tool works

A simple way to do this is to create a list and award each tool a score between 1 and 10 for each aspect to quickly visualize the data and make it more accessible to all key stakeholders.

3. Assess broader organizational and departmental needs

When reviewing your existing tech stack, consider any additional needs within your individual teams or the company overall. 

Are there business challenges or pain points that additional software could resolve?

An important category management function is determining when new products are needed, either by upgrading existing software or finding new solutions. 

4. Identify opportunities for cost-savings

Whether your business is looking to acquire new software or is approaching a contract renewal, look for cost-saving opportunities. 

Common cost-saving methods may include:

• Consolidating your tech stack to eliminate redundant tools
• Scaling up with one software supplier for better per-user pricing
• Considering related products with a spend analysis to see if there are more competitively-priced options on the market
• Leveraging market research and pricing data for negotiations

5. Overview the state of the market for each category

There are continuously new features, plans, and pricing to consider. Take advantage of market research and pricing benchmarks to assess each product category. 

SaaS procurement platforms make this part of the process much easier. For example, Vendr uses data integrated across multiple tools and categories to provide you with updated, transparent pricing benchmarks so you can make data-driven decisions about your tech stack and get a fair price.

6. Develop a tailored procurement strategy for each category

Each software category may require a tailored procurement strategy to acquire the right products, including a unique spend management process. Some software categories, for example, may require additional stakeholder sign-offs or ROI assessments. 

Consider the following when creating your procurement strategy: 

• Which departments and specific stakeholders need to sign off 
• What information stakeholders need to approve a purchase 
• Who will be in charge of final contract negotiations 

7. Leverage your category and market insights for negotiations and renewals

At this point, the category management initiatives you’ve undertaken have created significant market insights. 

Use these to facilitate new contract negotiations and contract renewals, ideally selecting the best tools for your business based on current and projected business objectives, challenges, and budget. 

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Make Vendr the foundation of your category management strategy

Vendr’s dedicated software procurement solutions streamline and enhance your SaaS purchasing decisions. Here’s how:

• Tailored intake and approval workflows with enhanced spend controls Effective category management requires customized intake and approval workflows for purchase requests, stakeholder approval, and renewal management. Vendr creates and automates procurement to streamline your purchases. 

• Compliance with procurement policy management

You can ensure transparency, traceability, and accountability in your procurement processes with Vendr’s detailed audit logs for SOC 2 compliance.

• Granularly track spend against contract commitments

Vendr offers SKU-level pricing benchmarks and in-depth buyer guides so you can see what other subscribers spend. Ensure you aren’t overpaying and get better deals during pricing negotiations.

• Automate renewal reminders and negotiations

Vendr automates reminders for upcoming renewals or ongoing negotiations, so you can avoid costly missed deadlines.  

• Manage all suppliers and contracts in a single centralized platform
  Vendr tracks all your suppliers and contracts in a single, centralized platform. This allows you to monitor the tools you’re using, see the costs, and know when contract changes are coming.

• Improve vendor relationship management through data analytics

Clear, detailed data analytics provide insight into your SaaS spend and use of existing tools. Use Vendr to review agreements and legal commitments, and optimize your procurement strategy.

Software procurement can be complex and challenging, but tailored tools and strategies—including category management and specialized procurement solutions—help ensure you’re selecting the right tools for the right price.

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