Why Procurement Needs Effective Collaboration to Manage SaaS Spend

Why Procurement Needs Effective Collaboration to Manage SaaS Spend

Guest post by Philip Ideson, Founder and Managing Director, Art of Procurement

According to Art of Procurement research, 30% of procurement organizations consider cost savings their top objective but are held back by poor quality data and lack of access to market intelligence and expert insights. Having actionable, category-specific benchmarks against which to measure their current SaaS portfolio creates an immediate opportunity to drive savings and advance their own maturity.

Cost savings typically becomes more important as procurement matures, before reaching a point of diminishing returns. While savings never disappears as an objective, it does eventually become secondary to other types of value. Managing the company’s SaaS portfolio efficiently and strategically allows procurement to do both on an ongoing basis, starting with savings and continuing on to other desired business outcomes.

Productiv has followed this trend closely as well. According to its findings, SaaS adoption increased 62 percent from 2019 to 2020 and grew by another 28 percent from 2020-2021. Even if the year-over-year increase from 2021-2022 continues to diminish, ballooned SaaS portfolios are in urgent need of management, analysis, and oversight.

Employees deserve, and generally receive, benefit of the doubt when it comes to meeting their own business needs, but the risks associated with unmanaged SaaS spend can quickly compound into an overwhelming situation. Procurement and IT both have a role to play in bringing it under management and driving successful SaaS procurement.

The imminent risks of an unmanaged SaaS portfolio

SaaS portfolio management is not an activity that can be postponed. The warning signs are everywhere, and potential fallout includes everything from data breaches to risk of non-compliance. According to Productiv research, 57% of business leaders consider SaaS app-related security and compliance issues to be a leading issue.

These three SaaS spend-related risks must be a top priority for all companies:

Risk of the unknown

When asked by the C-suite to assess the level of risk posed by unmanaged SaaS apps, most procurement teams are not in a position to answer with confidence. They simply do not know what apps are being used, by whom, and if there is any ROI. Moving the company from reacting to perceived risk to a place where they are addressing actual targeted risks requires someone (probably procurement) to step in and systematically bring the spend under management.

Enterprise IT risk

The IT function has undergone a change that corresponds to how technology is purchased and managed. They still own big ticket items such as CRM and ERP systems, and they retain responsibility for enterprise architecture and overall security.

As effectively as IT is managing these larger systems, death by a thousand cuts is still dangerous. The risks posed by SaaS apps are not being managed or even monitored in most organizations. Before they can address this situation, IT will need to work collaboratively with procurement to understand the current SaaS portfolio.

Creating risk while optimizing SaaS

It is critical that well-intentioned procurement and IT teams do not create disruption in the process of bringing SaaS spend under management. They can’t cut back on costs without communicating with the business to understand what apps are in use and what value they offer.

Yes, having these conversations with individual distributed business decision makers may prolong the effort to bring SaaS spend under management, but preserving business continuity is just as important as protecting the business from risk.

Why is now the time for procurement to act?

The most important reason of all to act now to bring SaaS spend under management is that the convenience of purchasing apps has not diminished. Procurement and IT need to lead a visible effort to address this spend – one that increases buyer awareness of the potential downside of independently adding technology to the company’s SaaS portfolio.

Putting business outcomes at the forefront of procurement’s work, and leveraging digital tools to do so conveniently at scale, will make clear to everyone involved that spend management strategy is not about stopping the business from getting what they want and need, but rather buying in a more coordinated and strategic way.

Check out this framework procurement can use to align with IT and optimize SaaS costs.

Schedule a demo of Productiv SaaS Intelligence™ Platform to see how a SaaS management platform can help procurement mitigate these risks.

About the author

Philip Ideson is the Founder and Managing Director of Art of Procurement, a procurement consulting and thought leadership practice that provides CPOs and their teams with the resources required to enable company growth. He has consulting experience from his time at Procurian and Accenture as well as direct and indirect practitioner experience gained by holding procurement leadership positions at Ford Motor Company and Pfizer.

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