What is IT Procurement?

What is IT Procurement

IT procurement is the series of activities and procedures necessary to acquire information technology (IT) products and services. IT procurement methods involve both strategic and administrative responsibilities. Procurement of Software as a Service (SaaS) is part of Saas Management and is quickly becoming the most important spending category in IT procurement. It includes discovery, exploration and evaluation of tools, as well as the creation and management of requests for quotations (RFQs), requests for proposals (RFPs), requests for information (RFI). Day-to-day tasks may include conducting market research, negotiating pricing, establishing terms and conditions for services, resolving invoice discrepancies and communicating the status of purchases with internal customers. Managing supplier relationships for the company is equally part of the IT procurement process.

Although it typically depends on the size of the company, SaaS tools will generally be one of the largest IT purchases. These tools are recognized as user-friendly and cost-effective particularly for organizations in dynamic development phases. Implementation and execution of such tools can be done by employees of various skill and experience levels, making them well suited to small to medium sized companies.

Why is IT procurement Important

Finding the right SaaS tools is an important challenge for a small to medium sized company. Prices are climbing rapidly and there are hundreds of products to evaluate in order to find the best fit to your company. Particularly startups and scale-ups which have limited experience in IT procurement, finding the right tools may be challenging. A successful IT procurement strategy is important because there are over 19,000 SaaS products available and although, having many great options is wonderful, it makes it difficult to identify which options are the best for the organization. Therefore, companies must contact multiple SaaS vendors simultaneously to understand the value each solution brings to the company and the best deal. However, because this task is time-consuming and challenging, companies oftentimes end up choosing the cheapest or best recognized tools rather than those which best fit their needs. 

In addition to an ever increasing number of choices,functionality offered by software is becoming more and more intricate and complex. As a result it becomes even more challenging to understand which tools are the right fit, and hence sophisticated IT procurement can be the key to leveraging software for business success. 

Businesses’ reliance on It is steadily increasing, especially with outside shocks such as the 2020 coronavirus accelerating this trend. Consequently, being IT proficient is paramount to staying afloat in any competitive business environment today. SaaS is quickly becoming the largest segment within IT, and SMB’s are typically using well over 100 SaaS tools and spending over 20,000$ on SaaS per month, and hence efficient procurement policy and strategic sourcing for SaaS tools is crucial to contemporary SMB’s.

Today’s supply markets are steadily becoming more and more complex, making a company’s reliance on the right IT procurement policy of utmost importance.

Consequently, a well-tailored procurement strategy and procurement best practices are important to be successful in the contemporary business landscape.

IT Procurement Tools

There are many different types of tools designed to help procurists make the right IT and SaaS purchase decisions. They are often referred to as software vendor management tools.

At a basic level there are free tools which provide comprehensive reviews (such as capterra and G2) on almost all the SaaS tools available, which procurists can leverage to both discover and explore tools to purchase as well as evaluate them. Additionally, there are deal websites such as Appsumo, which help businesses find large discounts on SaaS for free and without hassle using a promo code.

Although these tools provide an excellent free service, they obviously have limited value when making large and complex procurement decisions, and are geared towards smaller businesses.

Another solution available are the software consulting providers (such as gartner.com of vendr.com). Although these companies oftentimes market themselves as SaaS providers themselves, their business model is typically closer to that of traditional consulting business. They offer to find the best Software solution for their clients, renegotiate procurement contracts, and generally assist in the procurement process. In return they charge either a monthly retainer, a participation in the savings they generate, a kickback from the provider they recommend, or a combination of all of them. This is equally where the main problem with these types of services exist. Depending on the exact and often complex compensation structure, the service provider may be incentivized to not act purely on behalf of the customers best interests, but for instance recommend the tools whose providers will give them the largest kickback or generate the largest savings, irrespective of the quality it provides. In some cases these companies will also offer a type of license management software as it synergizes well with the services they offer.

The third SaaS procurement solution available are SaaS app stores such as onetool, which offer a very wide range of functionality including for SaaS procurement. Similarly to tool review sites they have a large number of SaaS providers on their platform procurists can browse and read reviews about. Generally only tools that have a certain threshold in quality are represented on app stores which makes the exploration process simpler. Additionally, app stores usually have featured recommendations in each category and offer discounts in the same way deals websites do. Similarly to software consultants, onetool provides a high level of customer support which given their products means free consultation on the best tools, similar to the ones provided by software consultants. This combines benefits from all three types of SaaS procurement Tools into one platform. The main downside to app stores is that not all tools are represented on them, and hence for certain niche businesses the right solution may not necessarily be provided.

Conclusion

It procurement is becoming increasingly important to business success, due to an ever growing reliance on IT and increasing complexity of the solutions available on the market. As a result using the right tools to make procurement decisions is crucial, and business software app-stores offer the best all-round solution for  SaaS procurement.