Procurement Outsourcing Vs In-House Procurements

When internal talent is stretched thin and in-house teams are struggling to get procurement tasks over the line, outsourcing procurement to a specialist third party can alleviate a ton of the operational pressures your team might be facing. That being said, outsourcing your procurement is a big decision requiring financial commitment and an agreeable working relationship between companies. 

So, if you have the bandwidth and budget, it can make more sense for some procurement tasks to be kept in-house, or to use a combination of the two.
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There are three outsourcing strategies you can employ:

• Outsource your procurement in full
• Keep all of your procurement efforts in-house
• Use a combination of outsourced and in-house procurement

Requirements will differ between businesses. The option you select will be determined by your budgets and time available for your in-house procurement teams. Here, let's dive into the advantages of procurement outsourcing, and which individual components of your overall procurement strategy might be best suited for your company to outsource versus tackling in-house.

What is Procurement Outsourcing?

SaaS procurement outsourcing involves hiring a third party to manage the acquisition and administration of SaaS solutions. 

The outsourcing partner brings specialized expertise in:

— Evaluating, selecting, and managing SaaS products, which can be complex due to factors such as subscription models, data security, and integration requirements

— Handling vendor relationships, contract negotiation, and performance monitoring, leveraging their market knowledge, negotiation skills, and ability to secure better pricing through volume discounts or bundling

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This approach helps companies:

— Optimize SaaS spending by taking advantage of the outsourcing partner's expertise and market insights

— Ensure compliance and security by making certain that SaaS solutions meet the company's data privacy regulations or industry-specific standards

— Provide ongoing support, including user training, troubleshooting, and managing upgrades or migrations, freeing up internal IT resources

What is In-house Procurement? 

n-house procurement refers to the practice of managing the procurement process internally within an organization, using the company's own resources and employees. 

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In this approach, the company is responsible for:

— Identifying and evaluating potential suppliers, which requires a deep understanding of the market and the company's specific needs

— Negotiating contracts and terms with suppliers, which demands strong negotiation skills and knowledge of industry benchmarks

— Managing supplier relationships, including monitoring performance, addressing issues, and maintaining open communication, which is crucial for ensuring a smooth supply chain

— Handling transactional procurement activities, such as purchase order processing, invoice management, and payment processing, which can be time-consuming and resource-intensive

What are the Benefits of Procurement Outsourcing 

1. Benchmark-driven negotiation

Outsourcing partners have extensive knowledge of the SaaS market. They access benchmark data, enabling them to negotiate effectively with SaaS vendors. This is because they work with multiple clients across various industries, giving them a broad perspective on market trends, pricing models, and best practices. They can leverage this information to secure better pricing, terms, and conditions, such as volume discounts, service level agreements, or customized feature sets. This expertise results in cost savings for the company. Outsourcing partners can often obtain more favorable deals than in-house teams, who may have limited experience in negotiating SaaS contracts.
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2. Guaranteed ROI and cost savings

SaaS procurement outsourcing often includes performance-based contracts. These contracts guarantee a certain level of ROI or cost savings. They can help companies identify unused or underutilized licenses, consolidate subscriptions across different departments, and negotiate better terms with vendors. 
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3. Data-led buying decisions

Procurement outsourcing partners analyze usage patterns, compare vendor offerings, and provide insights on how to optimize SaaS strategies. This data-driven approach leads to better outcomes. Companies can select the best-fit SaaS solutions that align with business objectives, reduce the risk of investing in inadequate or overly complex tools, and increase the overall value and adoption of SaaS within the organization.

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4. Savings in time spent on SaaS procurements

Companies can free up internal resources and time by outsourcing SaaS procurement. This time would otherwise be spent on researching, evaluating, and managing SaaS solutions. The SaaS market is constantly evolving, with new vendors, features, and pricing models emerging regularly. Staying on top of these changes and making informed decisions can be time-consuming for in-house IT teams. 
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5. Vendor Due Diligence

Outsourcing partners conduct thorough due diligence on SaaS vendors.They assess vendors' capabilities, security measures, and compliance with regulations. This is because they have the expertise and resources to perform comprehensive evaluations of SaaS providers. These evaluations include analyzing service level agreements, reviewing security certifications, and assessing data privacy practices. This helps companies mitigate risks associated with SaaS adoption, such as data breaches, service disruptions, or non-compliance with industry regulations like GDPR or HIPAA.

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What are the Challenges in In-house Procurements 

1. No visibility into Procurements

In-house procurement teams often lack visibility into the organization's overall SaaS spending. Different departments may purchase SaaS solutions independently, without centralized oversight. This leads to a fragmented view of the company's SaaS portfolio. Without a clear understanding of what SaaS solutions are being used and by whom, it becomes difficult to optimize spending, identify redundancies, and ensure compliance with company policies and regulations.
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2. Decentralized buying

This occurs when individual departments or employees purchase SaaS solutions without involving the procurement team. This can lead to a lack of standardization and inconsistency in the selection and management of SaaS vendors. Decentralized buying can also result in missed opportunities for volume discounts, as the company fails to leverage its collective purchasing power. This fragmented approach to SaaS procurement can lead to higher costs and increased risk.
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3. Shadow IT and SaaS wastage

Shadow IT refers to the use of SaaS solutions without the knowledge or approval of the IT department. Employees may sign up for SaaS tools independently to address their immediate needs, without considering the long-term implications. This can lead to SaaS wastage, where the company pays for unused or underutilized licenses. Shadow IT also poses security risks, as these unauthorized SaaS solutions may not meet the company's data protection and compliance standards.

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4. No benchmark data

In-house procurement teams often lack access to benchmark data on SaaS pricing and terms. Without this information, it becomes challenging to negotiate effectively with SaaS vendors and ensure that the company is getting the best value for its investment. This lack of market intelligence can lead to overpaying for SaaS solutions or accepting suboptimal contract terms. 
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5. Wastage of Time and Money

Managing SaaS procurements in-house can be time-consuming and resource-intensive. Procurement teams must dedicate significant effort to researching SaaS solutions, comparing vendors, negotiating contracts, and managing ongoing vendor relationships. This can divert attention away from more strategic initiatives and slow down the procurement process. 

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How outsourcing SaaS procurements to Spendflo can help your business grow faster. 

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Spendflo can help simplify SaaS procurements by acting as your virtual procurement team. At Spendflo, we know that managing SaaS procurement in-house can be a real challenge, especially when you're trying to grow your business quickly. 

That's where we come in. 

We act as your virtual procurement team, making the whole process simple and easy. With our centralized platform, you can manage all your SaaS subscriptions in one place. This helps you optimize your spending, get rid of redundancies, and make sure you're complying with your company's policies. 

Customer Story 1: Crownpeak

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Crownpeak, a company with multiple offices, faced rapid growth in its number of SaaS apps and spending. However, they lacked visibility into their SaaS purchases and ownership, leading to unexpected renewal surprises and an inability to negotiate effectively with vendors. Additionally, their decentralized SaaS procurement process resulted in duplicate software purchases across teams and individuals.

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By outsourcing their procurement with Spendflo, Crownpeak gained a centralized view of their SaaS subscriptions, enabling them to focus on key business objectives. Spendflo's proactive renewal notifications allowed Crownpeak to assess requirements and negotiate better pricing. Spendflo helped Crownpeak identify and eliminate duplicate SaaS apps, resulting in cost savings and improved efficiency.

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Customer Story 2: Wodify

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Wodify, a gym and studio management software provider, struggled with the lack of a single platform for their SaaS stack information. This made it difficult to gather insights on SaaS spending and usage, and last-minute negotiations were common due to poor renewal tracking.

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Wodify chose Spendflo to outsource their procurement process over other solutions like Tropic and Vendr because of Spendflo's effortless onboarding process, dedicated concierge team, and the consolidation of all SaaS information on a single platform. With Spendflo, Wodify was able to put SaaS buying and management on autopilot, customize each SaaS contract for their specific use cases, and ensure they were getting the best deals. 

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This saved Wodify significant time and resources, allowing them to focus on growth.

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Do you Want to be Next?

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Managing SaaS procurement in-house can be a complex and time-consuming process, leading to challenges such as lack of visibility, unexpected renewals, and duplicate software purchases. Our team of procurement specialsts have in-depth expertise when it comes to SaaS. 

When you outsource your procurement efforts to us, we help you navigate the tricky world of pricing, contracts, and negotiations. By using our benchmark data and best practices, we can get you the best deals and terms for your SaaS investments. This frees up capital for you to invest in growing your business. 

Spendflo's data-driven approach gives you insights and recommendations to optimize your SaaS investments, align them with your business goals, and avoid common pitfalls. With Spendflo by your side, your business can be more agile, responsive to market changes, and ready to seize new growth opportunities.
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Talk to our Procurement Experts now!