Starting out in Accounting at Sonos, Michael Denari (current Head of Global Spend and Business Systems at Canva) remembers being in the office listening to a Sourcing Manager – who soon became his mentor – “wheeling and dealing” on the phone.
Intrigued and impressed, Denari made his way to negotiate his first deal.
“That initial draw was a little bit of the hustle, a little bit of the fun, a little bit of the gamification that kind of felt like speech and debate back in my high school days.”
After moving to a Program Manager role, Denari gained a unique lens into just how inefficient a lot of companies run when they need to buy something. This experience, combined with his passion for policy, process, and systems, led him to where he is today: Building out a world-class procurement org at Canva.
Fun fact: Fast-forward a couple years, Denari’s former mentor became his very first Strategic Sourcing hire at Canva.
In this Q&A, we had a chance to talk to the modern procurement leader about his learnings building a team from scratch, how the adoption of SaaS is changing the way procurement teams function, roadblocks in SaaS negotiations, and more.
1. How is the continued adoption of SaaS forcing procurement orgs to reorient themselves?
A few years ago the conversation around SaaS sounded like, “There are no more one-time licenses with maintenance.” I think we're well beyond that now where no companies are really scaling and delivering a ton of value to their shareholders by being an on-prem or one-time fee software company.
As SaaS has grown, the biggest trend I've seen is the sheer amount of options. As more and more SaaS companies emerge, the problems they’re solving become more and more niche.
It used to be that you would have a governance tool that would include security, privacy, and legal at a broad scale. Now, we’re seeing software tools that solve just one of those use cases at a much greater depth. This is exciting because software is solving really complex problems for people at every company, particularly growing ones that need to scale. The problem then becomes choice.
A lot of employees are preferential to certain tools. There are a lot of tools that do very similar things and it's all about how you maintain and manage them. It becomes challenging to 1) wrangle your arms around all of the SaaS that you have and, 2) figure out how to drive policy and preference. There’s a lot of nuance and functionality these days where every SaaS product page displays 50+ features. It’s pretty easy to argue that one tool might be better than another for certain use cases.
Tying that all together into how your company is going to manage their SaaS and then drive standardization is becoming increasingly complex.
2. With a growing SaaS stack and company headcount, how do you approach change management?
In a procurement role, at least in the early days, you never want to come in and bring the hammer if you're building out an organization. As you get more mature and build trust, you have to instill the feeling that there are decisions that need to be made in order for the company to scale effectively.
There are trade-offs and a “tax” that you pay to go through the procurement process. That tax is the additional time it takes to bring on a new tool versus someone quickly signing a contract like they used to. If you pay that tax knowing as an organization you want to get to a certain point as you scale, and you’re all aligned on where that point is, the hope is that you become bigger, better, faster, stronger than where you are today.
The other piece is a philosophical one. Some companies are willing to have a little more disorganization to allow for flexibility of SaaS tools across the organization. There's a tolerance level in terms of how much flexibility you give your employees.
Regardless of where you are on that spectrum of high or low flexibility, there needs to be clarity. Procurement is in the perfect position for this. They’re right in the middle of IT, Finance, Security, Privacy, and Leadership. It’s our job to build an end-to-end procurement process that includes these stakeholders and drives these conversations.
“Where do we want to end up as a company? Are we going to make everybody go through a 50-question security review for a $1/license deal with public data classification, for example? How can we build an experience that allows people to move quickly through a lower-risk process?”
Procurement is at the central point where buying processes converge and I believe we can be a champion in this world as SaaS gets more complex.
3. What are your biggest takeaways from your experience building out Canva’s procurement org from scratch so far?
The biggest thing I always think about, and it stems from my time at Procore Technologies, is setting expectations with leadership around pushing off compliance and PO-related work until a year out.
When I started, the first thing I did was create a year for myself before PO compliance and some of the other tasks that can have a “negative” perception of procurement. I knew I needed the headroom to build relationships, understand the business, and start to build out my org first.
The second biggest takeaway was getting my arms around all of the teams involved in intakes. When I started at Canva, we had a complicated new software workflow. That's somewhat common when teams are solving for process in silos.
It’s really important that you're able to step into the shoes of your users and go through the process end to end. That should be the first thing you do to understand what that experience looks like in order to make process improvements. Then, you can get the right tooling in place.
4. When does it make sense for a company to bring on procurement?
Ah, the age-old question. Earlier than every company does is probably the answer. Most growing companies typically wait until something's broken before realizing they need to make a procurement hire.
Procurement is one of those roles that if you really understand the landscape of SaaS and vendor management and the value it can bring, it's a complete no-brainer to get a mid-level procurement manager earlier in the journey to make some of these processes fundamental to the company as you grow.
When you wait until things are broken, that means you've already wasted so much money and time in the hundreds of SaaS deals that happened prior. Making the ROI to pay for that manager is not too difficult when you're talking about hundreds of SaaS contracts that could be anywhere from 5% to 60% off.
As much as some people think they're great at negotiating, and I've met a lot of great negotiators on various teams around the organization, the consistency simply isn’t there because it's not their number one focus. So, while they might be able to pull off a killer negotiation on an occasion or two, no company with over 300 employees has less than a hundred pieces of SaaS. That’s when consistency becomes the biggest issue.
5. Speaking of consistency with hundreds of SaaS deals, what are the biggest roadblocks in terms of SaaS renewals?
Once you've come in and aligned processes for new software around Privacy, Legal, and Security, you run into issues when deals from before you started begin to creep up.
We’ve had to treat every SaaS renewal like new software because Legal and Security have built new processes over the last year. It can be really difficult to go through those renewals and discover tools that we probably wouldn’t have signed off on in the first place. Those conversations aren’t easy but they are necessary discoveries to drive the right business outcomes and get the company to understand why we may need to consider not renewing a tool, or make the necessary changes to how we are using it to continue.
That, plus the sheer volume of highly manual SaaS contracts, are complex issues with taking on SaaS renewals, especially when you weren’t around for the initial purchase.
The last thing is pricing. When deals are negotiated, there’s a precedent set. Let’s say you have someone like me who has a long memory of the types of discounts I’ve had with specific suppliers – that only works when you have an established relationship. It works a lot better on new software deals.
A supplier working a renewal with you doesn’t care that this new guy’s here and that he got a good discount working with them at his last company. They have a precedent set that the value was there and the company was willing to pay the original price. So, why would they dramatically lower it?
In these situations, you need to work around those constraints and figure out how to get to creative deals that move closer to what you might’ve gotten at a previous company.
6. What are your go-to SaaS negotiation tips?
1. Be very direct with your Sales reps
Think about the full picture vs. just driving the initial cost of a deal as low as possible. I’m very willing to buy licenses or software that my forecasts suggest I will grow into. I’m also willing to shelve licenses for a higher ACV if it brings down my cost per license enough that the payback period is within that contract. Higher initial ACV is typically more motivating for sales departments and they’re likely willing to give up on unitary pricing in that case.
Even if the AE you’re working with isn’t the ultimate approver, you can understand how their comp plan works and align the structure of the deal to maximize for that. In turn, you’re probably also maximizing for the people above them who need to approve.
2. Spatially map who you are talking to in each conversation (email or call)
Is this an AE at a 2,000-person company or a Director at a 100-person company? Their ability to approve discounts and move quickly highly depends on the size of their org and their title relative to that. In the former example, I know that AE is several rungs below whoever will ultimately approve the deal.
7. Where do you think procurement is headed in the next five years as it relates to the SaaS industry?
I have this view that there’s going to be tighter and tighter integration between the evaluation of SaaS, the procurement of SaaS, the implementation of SaaS, and the ongoing management of SaaS.
I view SaaS providers as one continuum that starts with business process needs. You evaluate the suppliers in the market, get procurement involved to figure out which is the best option, implement the solution, get the right infrastructure in place to maintain it, and then manage it from a vendor management perspective to maximize the value you get.
I think the lines between each step are becoming more and more blurred. That’s one thing I’m passionate about at Canva – pulling procurement into more of the IT org and establishing a Business Systems team to figure out how we can create a seamless continuum around how we handle each SaaS supplier in order to end up with the best possible tech stack.
I think one of the most undervalued skills is knowing how to choose the right suppliers and then manage them effectively. You’re relying on such different personas within your org. Sometimes, you end up with a hodgepodge of SaaS tools that aren’t talking to each other, that don't scale, and that aren’t achieving business objectives.
We’ll start to see more and more differentiation between SaaS tools in terms of the specific use cases they solve and I think procurement will become more integrated into that supplier continuum, from “I have a business need” all the way through to renewal.
8. What impact has Vendr had on Canva’s procurement org?
I talk to a lot of people who are building their procurement org from the ground up and my piece of advice is always to get Vendr in as early as possible. If you’re wrangling your arms around all of the processes, systems, tech, relationship building, hiring, etc., you’re going to quickly need to make choices on the things you can deliver value on. You need to be intentional.
Vendr essentially creates order to the chaos of SaaS that can be a complete time suck for a single individual. If you’re building out a team, Vendr’s an insurance policy on one of the highest visibility and frequent purchases any business has.
The visibility piece is key here. People are emotionally tied to their SaaS tools. They need their tools managed effectively. Managing SaaS is a full-time job which is why it’s really important to have a partner to help.
SaaS has such a wide range of discounting and different suppliers are more apt to discount. We’ve negotiated deals up to 80% off and this effectively cut out all of the margin because we’re growing and the logo is worth it. On the other hand, some suppliers aren’t willing to negotiate more than 10%.
It’s a hard guessing game because no single person is an expert on every SaaS tool they’ll encounter over the course of their career. It’s gut feel unless you have a tool and service like Vendr to take the guessing game out and provide clarity on what numbers to target. What’s a stretch? What’s an aggressive discount?
There are a high number of variables in every SaaS deal so having a partner like Vendr that can provide not only what we can target but also the why behind it and the negotiation approach to take is extremely valuable. That direction is how you get that extra 10 to 20% off.
9. Last but not least: What is your favorite up-and-coming SaaS tool right now?
I’m a big fan of Zip, an intake to procure tool. I implemented the tool early on and it’s created a lot of goodwill internally by automating a lot of our intake, legal, privacy, and security needs so that all the teams involved in a deal are put onto one workflow. It seamlessly integrates with Vendr for the SaaS negotiations we ask them to handle. It’s been really critical as we’ve scaled these past nine months.