Procurement Software

What is procurement software?

By definition, procurement software automates, streamlines, and manages the process of acquiring goods and services within an organization. This involves everything from requisition and purchasing, to supplier management and compliance.

Without the use of a tool to procure software, you ultimately put your business at risk of inefficiencies, costly errors, and missed opportunities for growth – each of which can have dire financial consequences, while taking up a significant amount of time.

The best software procurement platforms will ensure efficiency at each of these stages, ensuring that your procurement cycles are ultimately faster, more accurate, and aligned with your business goals.

Below, we’ve covered all there is to know about using procurement software, covering the benefits and challenges, as well as guidance on selecting the right platform for your business.

The benefits of using procurement software

Procurement software can deliver a number of business benefits in a relatively short space of time. These typically include:

Time savings

By automating repetitive workflows, streamlining approvals, and leveraging data to simplify the contract negotiation process, procurement management platforms reduce the need for human intervention and subsequently drive substantial time savings.

See how one company saved eight hours per week by using a procurement software solution

Cost savings

The top procurement software solutions deliver cost-savings in a number of ways:  

• ‍Spend visibility – This is often a key feature of any good software procurement platform, and for good reason. By providing companies with total visibility of their software spend – and usage – these platforms enable you to identify unnecessary or duplicate spending. As an example, you may find that multiple departments are using tools that serve the same purpose and could therefore be consolidated. With access to the utilization rates of any given tool, you can also make far more informed decisions at the point of renewal, whether that be to terminate a contract or make changes to the number of licenses – or features – required.
• ‍Pricing benchmarks – SaaS list prices are rarely set in stone and with the right pricing intel, you can often achieve substantial savings. Many procurement software platforms provide this data in the form of pricing benchmarks, with some sharing this data directly with customers to leverage in their negotiations, while others use it to negotiate on your behalf.The best procurement software providers, however, are those that also provide peer benchmarking data, taking factors such as your industry, company size, and other specific requirements into account. They will also know which levers to pull for the best outcomes, based on your unique circumstances and their detailed knowledge of the vendor.
• ‍Reduced maverick spending – By handling the procurement process from the point of requisition, procurement tools can also reduce maverick spending. In fact, many will also have functionality that enables software discovery, highlighting any instance of shadow IT that may already exist within your tech stack.

By having full visibility of every tool that’s being used across your organization, as well as those that have been forgotten, procurement software ensures you’re not unknowingly renewing unwanted or underutilized applications.

Improved vendor relationships

Procurement software plays a key role in enhancing relationships with vendors. By providing better visibility, clear communication, and data-driven insights, procurement software fosters more collaborative and productive partnerships. Here are a few ways it contributes to improving vendor relationships:

• ‍Clear expectations – Procurement software helps set and manage clear expectations between buyers and vendors. As an example, contract management functionality ensures that both parties have a clear understanding of deliverables, timelines, and terms, eliminating any ambiguity, while setting the foundation for a relationship based on transparency and accountability. Vendors know exactly what’s expected of them, and procurement teams can track and ensure compliance in real-time.
• ‍More streamlined renewals – By tracking renewals and providing automated reminders, procurement software not only prevents unwanted renewals, but it also provides companies with ample time to evaluate each application and avoids last-minute negotiations which can strain relationships.
• ‍Supporting vendor selection – Top procurement software providers will often be able to support vendor selection by leveraging their own knowledge and experience of the market, as well as by drawing on peer benchmarking data to make relevant suggestions.
• ‍Acting as an intermediary in negotiations – By acting as an intermediary in negotiations, these solutions can help to ensure that both parties reach mutually beneficial outcomes, for example ensuring that pricing and contract terms are fair to both. This ultimately instills trust, leading to longer-lasting, more positive vendor relationships.

The cost of not implementing procurement software

Aside from the benefits of implementing a procurement software platform, there are significant financial and operational drawbacks from failing to invest in one. Some of the key costs and risks that companies face by relying on a manual approach to software procurement specifically include:

Wasted spend – One of the biggest issues with manual procurement is that it can lead to major financial losses. With the average organization now using 130 SaaS tools, it becomes near-on impossible to manually track and manage each one. Not only does this lead to unwanted auto-renewals, but it also means that those that are wanted aren’t being properly evaluated to ensure the optimal license count – a problem costing companies with between 400 and 749 employees as much as $1.3M in wasted SaaS spend each year.

Longer contract negotiations – Another drawback to taking a manual approach to software procurement is the fact it can significantly delay the negotiation process, not to mention put a real strain on the vendor relationship.

There are a number of reasons often behind this, including extensive back-and-forth communications on everything from pricing to contract terms, as well as internal delays in the procurement process. Powerful procurement solutions can significantly reduce these delays by handling negotiations on your behalf, streamlining the approvals process, and providing the tools to simplify legal and compliance reviews.

See how one fintech company was able to save 30 hours a month on their negotiations

Longer procurement cycles – Inefficient procurement processes almost always lead to delays, often during the approvals stage. This not only wastes a huge amount of time for everyone involved, but also means it takes longer for the application to be implemented.

Compliance risks – Without the ability to centralize procurement, you run the risk of employees purchasing unsanctioned applications. The use of software in procurement not only eliminates maverick spending and shadow IT, but more advanced platforms will utilize AI, providing insights into key legal, security, and compliance terms within any contract, and flagging any that don’t meet your standards.

Missed opportunities – Lack of procurement software can significantly hinder your ability to secure the best deals across your software stack. It isn’t just cost-savings you stand to lose out on though, but also better contract terms. Without the right platform to analyze SaaS utilization and access contract benchmarking data, you could end up with unfavorable terms.

Impact on employee morale – The delays, frustrations, and potential errors that can arise from the lack of software utilization in procurement can have detrimental effects on employee morale. The sheer amount of time required for manual intervention and handling negotiations can also take talented procurement teams away from focusing on more strategic tasks.

The challenges of implementing a procurement management platform

‍Resistance to change – Companies that move towards a more centralized procurement process will need to consider the impact it may initially have on stakeholders across the business. As an example, some may be reluctant to accept a new process out of fear of losing autonomy, or concerns about increased bureaucracy. Having a plan to handle change management is therefore key.

‍Integration issues – As with any new technology, there may be possible integration issues that arise from implementing a procurement management platform. This may include lack of compatibility with existing systems, for example your finance, inventory management and ERP systems, and a lack of vendor integrations, preventing you from managing your full software stack.

‍Cost overruns – With some software procurement platforms, the costs can extend beyond the subscription fee. In other words, some providers will charge extra for system customization, integrations, negotiation services, benchmarking data, and even support. It can therefore be more cost-effective to choose a solution that includes each of these as part of its core offering.

How to choose the right procurement software

With a number of procurement software platforms on the market, it’s important that you’re taking your time to evaluate each solution. This will allow you to make the most informed decision and ensure that you’re selecting the platform that is most closely aligned with your organization’s current and future needs.

Here are some things to consider when comparing providers:

The platform’s ability to handle negotiations – Not only are negotiations incredibly time-consuming, but many organizations lack the expertise to know which levers to pull and when, in order to secure the very best deals on their contracts. The right provider will have a dedicated purchasing team that can handle negotiations on your behalf, freeing up your time while ensuring that you’re getting the fairest price and terms. Some SaaS procurement providers will only offer this service as an add-on, however we would always recommend opting for a solution that includes negotiations as part of its core offering.

Quality of integrations – It’s worth choosing a platform that can easily integrate with your existing systems and vendors, or has the capabilities to rapidly action requests for new integrations.

Get a detailed analysis of the SaaS Procurement and Management Platforms sector in this Lionfish Tech Advisors Report

Quality and breadth of features and functionality – It can also pay to look at the frequency that each platform releases new functionality, as this can indicate how innovative they are and how much they are investing in their product offering. This is also important for ensuring that the platform can scale with the growth of your organization.

‍Workflow capabilities – While most Software Procurement Management Platforms now offer workflow capabilities, enabling users to streamline the procurement process and eliminate common bottlenecks such as approval delays, many still only offer basic functionality. It is therefore important to consider how each shortlisted platform compares in this area and ensure that your chosen provider offers advanced functionality, for example ensuring that workflows can be customized to meet the specific requirements of your procurement processes.

Benchmarking data – When it comes to SaaS negotiations, the best outcomes are often fuelled by leverage in the form of pricing benchmark data. It is therefore worth investing in a platform that has an extensive database of pricing and discounting information for global vendors, along with peer benchmarking intel, for instance an understanding of the contract terms for similar users.

Savings guarantee – Almost every SaaS procurement platform on the market provides spend management functionality, yet very few solutions actually guarantee these cost savings. By doing your research and choosing one that guarantees savings, you can ensure maximum ROI on your procurement software investment.