Transforming Procurement: Strategies for Modern Businesses

What is Procurement?

Procurement is the business practice of sourcing, acquiring and purchasing goods and services that companies need to operate, provide for its customers and achieve its objectives. 

Procurement is a wide-ranging term that encompasses any single product, item or subscription-based service that a business needs to purchase. It can range from IT procurement to office supplies. However, when businesses need to procure software, SaaS procurement becomes of critical importance to any business operation.

In this guide to orchestration, procurement strategies and all things procurement, we will look through the whole procurement cycle and explain everything you need to know - both in the frame of SaaS and outside.

The Procurement Process

Procurement tends to be broken down into two distinct stages:

• Intake to Procure - From the initial request to bring in a new product and service to the confirmed decision to purchase. This includes the research, vendor selection, contract negotiation, managing compliance and obtaining sign off stages.
• Procurement to Pay - The management of financial requirements for the negotiated contract to ensure the service is paid for and successfully onboarded.

In any procurement cycle,  the key steps throughout both stages are usually the same:

• Requirements Gathering - Quantifying and qualifying the business needs and requirements for the service, including who will be using it, the rationale behind needing a solution, and how long for. This provides the blueprint for the intake request.
• Sourcing Suppliers: Identifying and evaluating potential vendors that offer the required goods or services. 
• Negotiation: Securing the best pricing, quality, and terms of service for cost efficiency and value. This is a crucial part of any procurement strategy, as these discussions dictate how successful the tool will likely be once implemented.
• Approvals: Once the negotiated terms are written into a contract, internal stakeholders such as legal, IT and Security, and senior management will need to approve various aspects of it, so that it is fit for purpose and for the business.
• Invoice Management and Payment: Approval of the invoice for the goods or services, and then finance issues the payment to the selected vendor

After procurement to payment, there are several ongoing stages that mean the process is always ongoing:

• Contract Management: Ensuring that suppliers adhere to agreed terms, such as timelines, pricing, and quality.
• Vendor Management: Maintaining relationships with suppliers to foster long-term value and resolve any issues.
• Cost Control: Monitoring expenses and identifying areas for savings without compromising on quality.

Procurement Challenges

With any working process, there are complications within every stage, and procurement management is no different - being a very complex and fluid process.

Managing multiple vendors

Whether monitoring ongoing performance levels and maintaining the agreed SLAs in a contract, or when negotiating a potential renewal whilst investigating new vendors as a BATNA in case the renewal doesn’t meet requirements, managing vendors is a key part of any procurement cycle. 

But juggling the demands of multiple vendors and the terms and conditions within each contract can stretch the resources and capabilities of any procurement team. If anything is missed, such as a renewal date or the relationship between vendor and customer is left unchecked, it can have performance and monetary implications - creating anything from vendor lock-in (if an auto-renewal date goes past unnoticed) or higher prices with fewer features if a vendor relationship isn’t maintained.

Lack of visibility and centralized oversight

A common yet major challenge for procurement management across the board. With over a hundred SaaS applications per company on average, monitoring not just all of these contracts but the features, pricing and key dates within them is tricky enough. However many companies take a very manual, siloed and disparate approach, leaving it to individuals or departments to keep track of their contracts and procurement operations.

This creates a disconnect where spend is difficult to control, tools and services become hidden and at risk of duplication, and companies end up overpaying.

Duplicate and overlapping contracts

A frequent side-effect of minimal visibility and centralized oversight, duplicate or overlapping contracts can ramp up costs for any organization. Companies can get locked into vendor contracts and end up paying much higher costs for tools they don’t need. This is usually a result of Shadow IT or poor procurement strategies that don’t monitor contracts or usage effectively.

The amount of variables per contract (SaaS)

Total cost. Pricing model. Usage limits. Number of seats. Data tiers. Geographical usage. Feature sets. Length of contract. SLAs. All of these are examples of the variables in every contract that need to be negotiated to the needs of the business, but also remembered and tracked. 

Not doing so can result in financial penalties or triggers, auto-renewals at non-negotiable rates, and a contract that’s not right-sized for business operational requirements.

Negotiation difficulties

Procurement strategies rely heavily on how contracts are negotiated, and the best deal a business can get. To do so, procurement managers and negotiators require:

• Comprehensive industry-wide contract data and pricing benchmarks to lever their own negotiations against.
• Expert negotiating strategies, best practices and policies that guide how a business operates discussions with vendors.
• Workflows and communication trackers that log and centralize all discussions with vendors, and keep negotiations moving smoothly and to schedule.
• Industry knowledge of tools and services, and how they will fit the organizational requirements.

Having all of these available in a combined manner is rare, and without them it makes negotiating good terms difficult. Also, the majority of vendors obscure their pricing, tiers and feature customization possibilities - so it’s vital you know benchmarks, common pricepoints and your own usage data.

Meeting compliance requirements

Legal, IT and Security must all form part of all procurement strategies and procurement cycles. They protect the business from legal issues, cyber attacks and security breaches. However, some vendors may not reach the standards that these stakeholders set for the business. 

And ratifying these vendors and contracts can take a lot of time and cause delays to any procurement process. Ensuring these are included without causing bottlenecks is a particular challenge.

Vertice is designed to take on these challenges.

The challenges above can derail any procurement strategies you have in place. This can cause costs to spiral, oversized contracts to be implemented, and poorly aligned tools being used throughout the business. This can have a devastating impact on your company performance, and throttle its growth.

The Vertice platform and procurement managed service is designed to alleviate these challenges. By providing datapoints from over 16,000 global vendors in a centralized, single-pane-of-glass platform, and with the new Intelligent Workflows solution that can supercharge, and adapt to, any procurement process, SaaS spend management and negotiation has never been easier and more impactful to business success.

Strategies for Effective Procurement

You can find about procurement strategies in our definitive guide, but some of the key points are below:

Identify the business need

Once a business need has been identified, the purchasing strategy can begin. The act of identifying the need really falls under the remit of procurement teams, but effective processes here will incorporate all relevant stakeholders, including product end-users and purchasing teams.

Start negotiations early

The more time you have to negotiate with a vendor, the better it is for you in the long run. You as the customer have more time to prep your business case, and work with the vendor to hammer out various terms and conditions within the contract to fully suit your needs. If negotiations start close to the auto-renewal date, the discussions become rushed, important data and information is more likely to be missed, and contracts tend to be ill-fitting and cumbersome. This also affects the vendor, as if the customer spends a year with a poor, expensive tool as a result of procurement contract negotiation, they are more likely to source an alternative upon the next renewal date. 

Compile as much internal usage info and industry price data as possible

These form your starting points, red lines and ultimate goals for your procurement negotiation strategies. They inform what negotiation levers in procurement to pull to ensure you end up with the best contract fit for your organization after starting discussions from the correct points. Without this information, you may start pricing discussions far too high, and end up paying for features and usage levels far beyond what you actually need. 

Establish your BATNA

An established best alternative to a negotiated agreement (BATNA) will lay out the next steps in the event that no deal can be made. Whilst the vendor may use negotiation tactics to make it seem like they hold the power, with a BATNA you have the ability to walk away if you don’t get a desired result. And a vendor will always want you as a customer more than not, even if that means giving discounts and concessions to keep you. 

Build trust 

Negotiation in purchasing is a human endeavor. The best way to improve negotiation tactics is to build trust, taking the time to get to know your supplier and its negotiating team by asking the right questions. 

Submit multiple offers

Procurement negotiation is about finding a happy mid-point between two parties. By submitting multiple offers — each reflecting a slightly different agreement — you improve the chances of striking this balance.

Include binding level-of-service clauses

Commit your supplier to upholding their end of the agreement with contract clauses and warranties (SLAs). If circumstances change and the agreement can no longer be met, these clauses will ensure your business doesn’t suffer.

Organize evaluation dates

You’ll want to arrange some dates for evaluating the success of the project — to see what’s working well, what isn’t, and how the overall partnership can be improved. These meetings are an opportunity for honest feedback and a chance to measure success, in line with the KPIs established during negotiations. 

Strategies can slow down or even fall apart if your workflows aren’t up to scratch. Procurement software helps streamline operations and make them more efficient and robust. You can discover how in our essential guide:

Procurement Orchestration

Procurement strategies and stages can be as modern and robust as you can make them, but you need something to stitch them all together. Something that ensures every intake request is on track, involves all stakeholders and touchpoints, and routes requests through the procurement workflows correctly.

This is procurement orchestration. The strategic integration of all procurement processes that means procurement is coordinated, centralized and communicated. 

By ensuring that all points in a procurement cycle are connected and that requests flow through procurement workflows smoothly, orchestration can help:

• Manage spend, supplier, contracts and timelines
• Keep to requirements
• Customize processes to fit specific needs
• Collaborate more easily and effectively with stakeholders

As a guide to orchestration, it achieves this by:

• Integrating systems and stakeholders. Processes that may be siloed in different systems or departments are brought together, creating a cohesive workflow. 
• Improving stakeholder experience. A single point of contact for stakeholders is provided to access procurement resources, as well as clear time limits and SLAs on approvals.
• Increasing efficiency. Its managed routing and stage guidance can reduce cycle times and eliminate user frustration. 
• Empowering procurement. Procurement orchestration can help procurement focus on creating new business value, rather than stuck pushing requests through a process. 
• Democratizing decision-making. Users are provided with their own areas of control, which are all connected to the entire process - meaning users feel empowered but aren’t bottlenecks. 

Smart procurement orchestration is the most modern version of this. By automating the process with intelligent routing, and with a data-driven, interconnected workflow, procurement managers can leave the system to guide orchestration so they can concentrate on what they do best - researching, negotiating and strategizing. 

Vertice is the leading procurement orchestration platform

Forget manual processes and chasing tasks, Vertice Intelligent Workflows is the market leader in intelligent procurement orchestrations. 

Created by experts in the SaaS spend management space, Intelligent Workflows was built from the ground up to specifically address the problems of procurement management and orchestration, and provide an accessible yet reassuringly complex and intelligent solution that can supercharge processes and power business growth.

Some key components include:

Stakeholder Accountability - Automate the accountability and tasking of all stakeholders involved in the purchasing process.

Rejection Handling - Accelerate your workflows by creating pre-defined rejection handling, resulting in automatic re-assignment or escalation.

Integrated Intake Requests - Seamlessly map intelligent workflows into your current process by integrating purchase requests directly into Slack and Jira.

Customizability - Build a custom workflow with our no-code drag-and-drop builder that contains custom and template criteria and seamlessly integrate it into your existing systems.

Visibility - Gain granular visibility into all ongoing purchases, renewals and intakes.

Tracking - Ensure buying compliance with all purchasing documents and approvals in one place.