Solving the procurement problem: Too many tools, not enough data

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Procurement professionals and IT leaders tasked with managing software procurement today can often only focus on the top 20% of vendors. Why? It’s a convergence of three main factors: lack of data, limited resources and inefficient tooling.

SaaS and vendor management has become increasingly complex

Procurement and IT are being inundated with software access, vendor intake and renewal requests. Productiv found that the average business has 371 SaaS apps (up 32% over the past two years) and that 85% of SaaS contracts are one-year agreements (up 6%). That means more apps to manage and more frequent renewals every year. And that’s just SaaS. When you account for other software and services, many businesses are managing relationships with over 700 vendors across various indirect procurement categories.

While the workload is increasing, the workforce is not. Most businesses I’ve spoken to haven’t increased procurement and IT headcount since 2020, and some have even reduced the size of these teams. With more work and no extra hands to get it done, procurement and IT are increasingly relying on software and services to fill the gap. This patchwork of tools across various steps of the vendor management lifecycle has created technology, team and data silos. Instead of increasing efficiency, these tech stacks start adding up to a lot of manual work to bring everything together.

By the time it comes to making strategic decisions, procurement and IT find themselves with very little time and data (if any data at all) to work with. As a result, many teams have resigned to only focusing on a small subset of high-cost vendors. But with more than half of vendor investments not being actively managed, businesses are wasting an incredible amount of spend and opening themselves up to a variety of risks.

How is this problem solved? The demands of the business aren’t changing anytime soon and, based on trends, likely neither are the size of teams. Procurement and IT won’t be able to meet business needs and get back to focusing on value add work until they fix the process and data issues. But once they do, they can quickly start to spend smarter, control risk and work efficiently.

Spend smarter

Productiv found that only 47% of SaaS licenses are actively used in the average portfolio and 35% of SaaS apps are redundant. Procurement knows they are leaving money on the table, they just don’t have access to the data they need when they need it to effectively capture those savings. That data is siloed across tools and teams or simply doesn’t exist. As a result, teams have to make their best guess and rely on reports from vendors, which leads to excess spend and bloated tech stacks.

With more insight into what applications are being used across the business as well as how much they are being used, procurement can more effectively collaborate with IT, line of business leaders and security to understand the needs of each department and adjust technology investments accordingly. These adjustments come in the form of license rightsizing, app consolidation at renewal and decisions about which new apps should be purchased.

Category consolidation is a simple and fast way to start spending smarter once procurement and IT teams have the data. We found that the average organization today uses nine project management apps, seven sharing and storage apps, and five messaging apps. Not only does a high number of collaboration apps have the potential to actually hinder collaboration (a productivity cost), it’s also a huge source of wasted spend.

Control risk

A Gartner study found that 83% of legal and compliance leaders discovered third-party risks after the initial onboarding process. This means that many organizations are not adequately assessing the risks posed by vendors in a timely manner.

To mitigate these risks, organizations should conduct vendor risk assessments as part of the software procurement process. This includes assessing the vendor’s security and privacy certifications, as well as their compliance with relevant regulations.

By proactively obtaining this information, teams can save time and avoid delays. In addition to helping make more informed decisions about whether to work with a particular vendor in the first place, this information can also help answer any questions that may arise during the renewal process. For example, before an organization decides to add licenses for a team in Europe during a renewal, they can already have the information they need to quickly determine that the app is GDPR-compliant.

Additionally, we are all well aware of the risks associated with rampant shadow IT use. By making it easier for employees to find and request the tools they need, teams can proactively reduce the number of unsanctioned apps across the portfolio.

Work efficiently

Many businesses have different systems (or multiple different systems) in place for application access and new vendor requests, intake approvals, risk assessments, contract renewals and license rightsizing. This makes the end-to-end vendor management lifecycle a disjointed process stitched together with a mess of integrations and manual tasks. As you can imagine — and have likely experienced — this has a big impact on visibility, collaboration and decision making.

Businesses must find ways to standardize and streamline processes across requests, intake, risk assessments, renewals and rightsizing. When all of these processes can be run out of one platform, teams no longer have to waste valuable time jumping from system to system to gather the stakeholders and data together needed to make a decision. This also provides the business with one source of truth to reference back and understand why past decisions were made.

Unlock full procurement value

Procurement can offer incredible value beyond managing a subset of the business’s most expensive vendors. The key to unlocking this value is to implement processes that remove the friction across the vendor management lifecycle and equip teams with the data they need when they need it.

Teams will finally be able to know exactly how much to spend and the value they’re getting, quickly arm employees with the right tools to get their jobs done, and stay ahead of security and compliance concerns to keep the business safe.

Learn how Productiv, a unified platform for SaaS and vendor management, can bring teams together to make faster, smarter procurement decisions.

FEATURED COMPANY

Productiv

Aashish Chandarana, Chief Information Officer, Productiv

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