Software is more accessible than ever before, thanks in part to the rise of software-as-a-service (SaaS) over the past two decades. For the average organization today, 10 new applications enter the company’s tech environment, while four exit active use every month. Yet, most organizations have no idea this occurs. This massive shift to cloud-based software fundamentally changed procurement’s role in obtaining and managing new software.
Instead of massive servers and months-long implementations, any employee with a credit card can purchase SaaS — including customer relationship management, accounting, video conferencing, file storage, and team collaboration applications — and begin using the tools in minutes. It’s why the average company now employs 651 SaaS applications.
It’s a staggering number. But it all comes down to SaaS governance, especially procurement management.
What is Procurement Management?
In SaaS, procurement management involves the sourcing and purchasing of software applications, as well as overseeing contract governance and vendor relations. Organizations employ procurement strategies and hire procurement management teams to vet potential software purchases, examine risks, control costs, and proactively manage license renewals.
Before the explosion of cloud-based applications, procurement teams took the lead in vetting and evaluating different vendors, communicating options to senior leadership, and managing the implementation, which often involved physically installing the software on servers and individual computers.
What used to be a straightforward undertaking with clearly defined processes is far more convoluted — especially if you consider lines of business (LOBs) and individual employees now control 65% of SaaS spend, a 22% increase over the previous year.
These off-the-grid purchases not only hinder SaaS management, they weaken purchasing power for procurement professionals. To stay abreast of their ever-growing SaaS inventories, consider using technology to optimize and enhance SaaS procurement management.
Key Benefits of a Strong Procurement Management System
SaaS procurement management isn’t rocket science, it simply requires company-wide alignment and a robust management tool. Look for these three core features of best-in-class procurement management systems:
- Centralized visibility and governance: Instead of relying on manual processes prone to user error, SaaS management solutions use artificial intelligence (AI) to spotlight and document all SaaS tools across an organization, including applications purchased outside of the traditional procurement process. Additionally, many procurement management solutions integrate with accounting and finance software, including Expensify and NetSuite, to log purchases in real-time. Your IT or software procurement teams can use this data to determine which new apps require further scrutiny for security and compliance.
- Contract and renewal management: SaaS governance quickly becomes unmanageable without a dedicated procurement management system. Consider how 1 in 3 employees (for large organizations with more than 1,000 team members) purchase SaaS applications for business use via expense reimbursement. Not to mention most organizations average three SaaS renewals every business day (45 per month).
- Renewal alerts: The technology catalogs SaaS contracts and renewal terms in a central hub and alerts you to upcoming renewal deadlines. It eliminates auto-renewals for tools you no longer use or need, and prevents the associated costs that come with missed renewals. You can use these insights to measure your total application spend and estimate future costs.
- Real-time usage insights: SaaS management solutions provide real-time visibility into application usage (or lack thereof) for each license, as well as the overall number of licenses for specific applications, so procurement teams can make data-driven decisions to reduce costs and boost profitability. These insights guide investment into new software your employees need and reveal unused features and licenses, which you can use to deprovision or downgrade SaaS licenses, also known as rightsizing.
At the end of the day, unmanaged SaaS procurement easily grows unruly, especially when you consider the large number of applications that enter and exit your organization each month. Instead of relying on manual spreadsheets or allowing individual business units to self-report SaaS adoption, consider investing in a SaaS procurement management system, like Zylo.
Zylo overcomes the challenges of SaaS governance, spotlights waste and underutilization of current applications, automates renewal management, and reduces overall spend and risk.
To see how Zylo streamlines SaaS management for procurement leaders, reach out to request a demo today.