SaaS purchasing process: 10 ways to improve how you manage and buy software
Discover 10 proven strategies to enhance your SaaS purchasing process. Streamline operations, improve cost-efficiency, and centralize workflows with expert insights in this comprehensive guide.
The SaaS purchasing process is one of the most important and ubiquitous functions in any organization given its widespread impact, both functionally for departments to run their day-to-day operations, and monetarily for companies to oversee and optimize how they spend across the organization.
Even so, for many organizations, the SaaS purchasing process happens in the background. Many companies may not even notice their own purchasing process—or lack thereof—until something goes wrong.
As organizations grow, it becomes increasingly important to establish a strong, well-documented procurement process for SaaS software.
Many purchasing teams have systems and processes that waste time and aren’t meeting industry best practices. In order to support growth-minded companies, purchasing teams need to scale systems and streamline spending. In fact, SaaS waste is becoming one of the most pervasive issues in modern organizations. The average company wastes around $135,000 annually on SaaS tools they no longer use or need.
This SaaS purchasing guide and purchasing process questionnaire is meant to help you make impactful changes to your procurement function.
Use this guide to identify your purchasing team’s areas of strength and to help determine areas where your processes could be stronger. Each question has actionable advice for bringing your purchasing process up to speed in a successful and manageable way.
1. A Single View of Software Suppliers and Spend
Do you have a single view of all software suppliers and spend?
To optimize and track SaaS spending effectively, you must have a clear understanding of the costs associated with each software supplier. This information should be readily available in one centralized location, allowing you to identify which vendors you're paying, and how much you're spending on each.
Many fast-growing companies often face fragmentation in their purchasing processes, resulting in data silos and inefficiencies. Licenses and tools may quietly auto-renew, leading to significant budget wastage. To combat this, you must consolidate your software supplier data into a single source of truth.
Solution: Collect Your Tech Stack into a Simple Spreadsheet
To begin, designate a project owner responsible for gathering information from department heads and consolidating it into a spreadsheet. Start by documenting the key details of the top five tools used in each department, as these often account for the majority of your software spend. This process will uncover redundancies and unused licenses, enabling you to make informed decisions during renewal periods.
2. Tracking Renewal Dates
Does your purchasing process track renewal dates?
Missed cancellation windows can result in substantial financial waste. Even if a software purchase was made through a review process, it may still auto-renew, especially if automatic renewal notifications are not received. It's essential to proactively manage renewals and plan for future purchases within your tech stack.
When collecting tech stack data, ensure that each department head provides renewal dates. Prioritize renewals occurring within the next 90 to 120 days, as this aligns with the typical lead time for reviewing and renegotiating agreements.
3. Managing SaaS Contract Data
Has your SaaS contract data outgrown the spreadsheet?
While spreadsheets are a useful tool for initial data collection, they are not a sustainable solution for long-term contract management. Spreadsheets lack the ability to provide real-time updates and may lead to shadow IT and untracked corporate card purchases, which can introduce operational risks.
Consider transitioning to a vendor management system when your organization outgrows spreadsheets. Such systems offer centralized and automated contract management, ensuring greater control and visibility over your software agreements.
4. Centralizing the Purchasing Process
Is your purchasing process centralized?
An efficient SaaS purchasing process should encompass the entire procurement cycle, from purchase requests to approvals, security and legal reviews, purchase orders, invoicing, and payment. Centralization of this process provides visibility into workflows, streamlines operations, and helps detect and address discrepancies.
Implementing a centralized purchasing process, preferably within a SaaS platform, offers numerous benefits. It facilitates the automation of invoice processing, and supplier payments, and ensures data integrity between systems, leading to data-driven decision-making and increased reporting efficiency.
5. Dedicated Procurement Person/Team
Do you have a dedicated procurement person/team?
As organizations grow, procurement becomes increasingly complex and requires specialized attention. While smaller companies may have their C-suite or finance department handling procurement, larger enterprises often establish dedicated procurement teams or hire procurement managers to handle the workload.
A dedicated procurement function brings several benefits, including process improvement, streamlining purchasing practices, better financial planning, cost savings, increased productivity for stakeholders, and enhanced trust-building with internal stakeholders.
6. Benefits of Having a Procurement Function
- Process Improvement: Procurement teams can establish and ensure efficient processes, optimizing the procurement of goods and services.
- Streamlined Purchasing Practices: Procurement can lead in contract management, supplier evaluation, and negotiations.
- Better Financial Planning: Procurement helps align strategies and manage capital expenditures effectively.
- Cost Savings: Procurement professionals identify cost-saving opportunities, reduce waste, and foster beneficial supplier relationships.
- Productivity Gains: Stakeholders benefit from automated contract management and procurement processes.
- Building Trust: Procurement, with the right processes, enhances stakeholder perception and trust.
7. Implementing a Standard Purchasing Process
Do you have a standard purchasing process?
Standardizing your purchasing process is crucial for efficient approval workflows and documentation. Simplifying software requests reduces the temptation to bypass the process, empowers stakeholders, and facilitates procurement spend tracking and analysis.
Begin by creating an intake form that includes essential information and a solution recommendation from stakeholders. Develop a strong workflow with designated approvers from various departments to expedite the process. Empower stakeholders to follow up effectively to ensure a smooth software lifecycle.
8. Documenting Purchasing Policies
Are your purchasing policies documented?
Establishing clear purchasing policies is essential to ensure stakeholders understand and adhere to the procurement process. Documented policies reduce churn in your tech stack, enhance productivity for both finance and stakeholders and prevent issues during the SaaS buying process.
Consider documenting policies that cover purchasing thresholds, baseline requirements for various departments, the use of preferred suppliers, and expected timeframes for new software requests.
9. Conducting Legal and Security Reviews
Do you run legal reviews?
Implementing a robust legal review process is crucial for safeguarding your organization's interests when dealing with complex SaaS software agreements. A well-documented set of prerequisites ensures quick reviews to meet legal and security requirements.
Key points to consider in a legal review include contract term compliance, service-level agreement protections, termination rights and terms, indemnity and liability limits, and avoiding auto-renewals when possible.
10. Leveraging Price Benchmarking
Do you leverage price benchmarking?
When procuring SaaS software, it's essential to avoid hasty decisions and take a comprehensive approach. Price benchmarking involves evaluating software prices from various competitors in the same space, enabling you to make informed choices.
Consider factors such as billing frequency, contract terms, bundled features, volume discounts, payment methods, and historical price comparisons when benchmarking prices. Leverage tools like Vendr to negotiate favorable terms and pricing, ensuring cost-effective software procurement.
How Vendr helps manage SaaS purchasing
Mastering the SaaS purchasing process is crucial for organizations looking to optimize their software resources, streamline operations, and enhance cost-efficiency. By implementing these ten strategies, you can build a robust and efficient procurement process that ensures you get the most value from your SaaS investments while minimizing waste and inefficiencies. Start your journey towards a best-in-class purchasing process today with Vendr and reap the benefits of effective SaaS software management.