Gone are the days when software used to be purchased centrally, by the IT procurement department. The purchasing process included requesting an RFP, followed by a lengthy review, evaluation and approval process.
Nowadays, the market for software is primarily made up of affordable and instant-onboarding SaaS tools. As of Jan 2020, there were 15k+ SaaS tools on the market!
One of the key reasons behind the growing adoption of SaaS is their contribution to the increased efficiency of employees, in a situation of speedy transition to working remotely. And as SaaS tools are getting more and even better, that employee efficiency is likely to get an even bigger boost. But, SaaS is not only impacting the employee efficiency, it is also completely changing the way IT Procurement departments are working, bringing up numerous new challenges for them to solve.
Unlike on-premise software, SaaS tools are very easy to acquire. With only requiring credit card info and some contact details, SaaS apps take as little as a few minutes to sign up and onboard. Hence, it is very easy for both businesses and individual employees to add a new tool to the existing company SaaS stack, without even notifying the IT Procurement. Even though these are low-cost SaaS, making up for a small share of the entire SaaS spend, they contribute to a big part of the SaaS inventory. It is estimated that about 25% of employees are purchasing SaaS apps on their own, and then expensing them.
While this non-centralized SaaS acquisition allows the employees and business units to act fast when a SaaS tool is needed, it results in IT procurement’s lack of visibility on the SaaS spend and usage, and exposes the organization to increased security, data breach and lack of compliance risks.
One of the key goals of procurement is to look for ways to optimize spend. But, with lack of awareness of what SaaS tools are used across the organization, and the extent to which they are used, procurement cannot figure out what opportunities it can snatch for optimizing the costs.
Which is more, the lack of visibility on usage, resulting also from employees purchasing and expensing SaaS apps. is a reason for a lot of wasted spend. This is spend for SaaS tools with redundant functionality, as well as SaaS upgrades that are not really used.
The lack of visibility on SaaS assets poses another big challenge to procurement - surprising renewals. And that issue has huge impact, considering that an average organization needs to handle approximately 3 SaaS renewals per business day. But, with no awareness on the SaaS purchased by employees, there is no way to prepare for a renewal. Hence, decisions to renew are frequently made last-minute and reactively, which results in renewing licenses which are unused and missed opportunities for negotiating better SaaS pricing terms.
The growing adoption of SaaS is causing more and more frustration for procurement specialists. But, SaaS software is unlikely to get abandoned, just the opposite - we will be seeing more software assets adopting the SaaS model. So, procurement must embrace the challenge of SaaS vendor management, and do it in an efficient manner, so no excessive time and efforts get spent.
This is the practice of monitoring and managing, in a proactive manner, the SaaS stack in your company, throughout the entire lifecycle of each software tool. SaaS vendor management includes 4 stages: Gaining visibility on all SaaS assets paid for by the company, optimizing the licenses to match the actual usage, renewal planning and governing SaaS purchases.
The first, discovery stage is particularly important for procurement. With no visibility on the existing SaaS inventory, no optimization actions can be taken.
With SaaS management, procurement becomes fully aware on the SaaS spend, and gains information on what tools have been purchased, by whom, under what terms, etc. It is essential to keep a centralized record of all SaaS expense, though, so both procurement and IT can look into the SaaS details they need and use them as a basis for taking a decision.
With visibility on SaaS, procurement and IT can work together to:
For example, they may identify that the organization is paying many times for one and the same software. In this case, they may decide to close down all individually purchased accounts for that software, look into signing up for an enterprise license instead, and negotiate better pricing per seat, improved security, etc
Or, if the discovery stage shows that the organization is paying for numerous applications having overlapping functionality, it may identify which ones are most appreciated by employees and close all other duplicating SaaS, in favor of the most appreciated tools.
Managing SaaS renewals is only possible if you are aware about the renewal, well before the renewal date, and have all needed details about the license to be renewed - terms, cost, usage, etc. Only then would you be able to take an informed decision about the renewal.
With several SaaS tools being renewed each business day, on average, it is a good practice to schedule the renewal review dates in your calendar, so you don’t miss a renewal review.
The growing list of SaaS tools has made organizations consider adopting SaaS vendor management to cut unneeded spend and reduce risks. But, with hundreds of SaaS applications to be managed, manual efforts take too much time. Moreover, if manual SaaS management is based on spreadsheets, it can soon turn to be inefficient since spreadsheet records may quickly become obsolete. New SaaS tools are signed up and abandoned daily, and reflecting those changes in the spreadsheet record can easily get skipped.
Hence, organizations should consider using SaaS vendor management platforms like Oveo, to manage and optimize their SaaS spend. Oveo takes the SaaS management burden off the IT shoulders, leaving them more time for strategic tasks. At the same time, it enables easy SaaS access and increased productivity for employees. To find out how Oveo can support IT procurement in their daily SaaS vendor management tasks - request a personalized Oveo demo now.