"Procurement is focused on finding, purchasing, and optimizing ROI from the right tools for the rest of their organization; they need to do the same for themselves," says Uri Haramati, Co-founder and CEO, Torii. In this article, Uri shares three crucial ways procurement can become a reliable partner for spend management!
There’s no denying that cloud-based applications have changed the way tech stacks ebb and flow. Now that individuals are able to go straight to the source and purchase a new app in a matter of clicks, traditional sourcing and procurement processes have all but gone out the window.
If distributed adoption and app ownership aren’t properly managed, the connection between the source, i.e., the application, and procurement breaks. Contract, usage and spending data become scattered and siloed, which makes procurement processes an uphill battle and undermines the team’s influence.
Procurement teams often feel like they don’t really have a seat at the table to extend their influence. Some feel marginalized; seen solely as “paper pushers” focused on contract details and being an intermediary between end-users and vendors, rather than as advisors with shrewd insights. In this position between a rock and a hard place, between perception and reality, organizations unknowingly allow SaaS spending waste to persist.
As the looming global recession influences business plans and weighs on the minds of executive leaders, procurement teams are in a prime position to be the strategic partner organizations need to ensure they’re getting the best business value from their application investments.
Here are 3 tactics to help procurement teams master ongoing spend management, app rationalization, and licensing recommendations to become a more powerful internal resource:
1. Break down data silos
Cost optimization and getting the best contract deal possible are a big part of procurement’s job, but they can’t cut costs in a vacuum. When apps are acquired by business teams or even individuals, visibility into departmental and even company-wide spending diminishes, and chances of waste increase.
That is unless there’s a collaborative management strategy to avoid data silos. If procurement has access to application usage and spend data from the jump, they can work smarter, not harder, to make cost-optimization recommendations, like which applications and how many licenses should stay, go, or be augmented or downsized.
IT departments have a mutual, vested interest with procurement in creating visibility into all SaaS applications. A conscious coordinated effort by IT and procurement to discover, map, and build a Single Source of Truth (SSOT) for their full SaaS stack is a win-win. Unless you have a tool that automates discovery of both known and unknown (Shadow IT) apps, this will also require continuous, time-consuming manual investigations as well as participation from application owners.
2. Eliminate surprise contract renewals
Once procurement teams have the necessary data, they need time to turn data into insights and strategic decisions. Surprise renewals, a real pain in the SaaS, drastically shorten procurement’s runway to get renewal-ready, which forces procurement teams to be reactive, rather than strategic. This only underscores the importance of gaining visibility into SaaS applications and their associated contracts and real-time usage early on.
With complete SaaS data and ample time to strategize ahead of renewals, organizations need not worry about those surprises that lead to waste. Procurement teams can proactively compare and cross-examine app redundancies, uncover unused licenses, evaluate app usage trends, engage with end-users to assess their needs, and leave no cost-optimization stone unturned. Then, come renewal time, they’ll be ready to negotiate contracts like a boss, or make the decision to end the contract altogether and work with sourcing to acquire a new app that delivers more value and/or is more favored by end-users.
3. Maintain collaborative relationships for continuous spend management
Spend management shouldn’t only be considered at the beginning or end of a contract lifecycle. It must be ongoing, because distributed application adoption happens all the time, every day. Procurement teams should focus efforts on continuous spend management. This requires that they maintain constant access to reliable, real-time data and collaborative relationships throughout their organization.
In order to make proactive license and cost optimization recommendations, procurement teams must be able to continuously evaluate trend data, real-time license usage, and user behaviors. If procurement is still operating with data blind spots, they may need to work with partners in their org to connect the dots and, once again, break down data silos for a complete picture. Only then can they come in early to the contract lifecycle process with data-backed recommendations, and ultimately influence sourcing decisions.
To build bridges and connect data from one team to another, procurement will need to build out some new processes. This may include creating a process for application owners to submit contracts and open the flow of data to procurement. Or, establishing a recurring reporting cadence to bring SaaS spending insights to executive management. Or, working with IT to extend a feedback portal to end-users where they can submit thoughts and preferences regarding their applications.
Procurement teams can’t shift the paradigm on their own though. Executive and department leaders must be willing to work with them hand-in-hand to align sourcing and purchasing with business goals and end-user needs.
Elevate the role of procurement with the right tools
All these tactics are possible with manual processes, but these inevitably create inefficiencies, inaccuracies, and waste of their own. SaaS stacks and associated data are changing all the time, so, essentially, by the time data is collected manually, it’s out-of-date – undermining procurement’s ability to effectively manage spend. Procurement is focused on finding, purchasing, and optimizing ROI from the right tools for the rest of their organization; they need to do the same for themselves.
Procurement teams need digital tools that automate manual tasks, accelerate their time-to-insights, and support full visibility of SaaS stacks. With these tools in hand, they can become a true strategic partner helping teams throughout their organization achieve their business goals and persevere through economic uncertainties or whatever challenges the future has in store.