The global software procurement software market is projected to reach $14.9 billion by 2029. Organizations are buying more and more software as a service (SaaS) to meet their needs. Yet, the processes that drive this SaaS procurement are adapted from traditional practices that don’t serve modern needs. Therefore, they are left with  inefficiencies, hindered collaboration and version control issues. 

In this guide, we explore what a modern software procurement process should look like. 

What is a software procurement process?

The software procurement process is the strategic acquisition of software solutions to meet operational needs and drive business objectives. 

It involves a series of well-defined steps to assess software requirements, evaluate vendors, negotiate contracts and implement solutions. Thus, business leaders can make informed decisions, optimize software investments and mitigate risks.

Key steps in the software procurement process include:

• Identifying software needs
• Evaluating options based on functionality and suitability
• Selecting vendors
• Negotiating favorable contracts
• Ensuring seamless integration
• Continuous monitoring and evaluation of software performance 
• Proactive vendor management

The software procurement process aligns technology investments with business goals and maximizes operational efficiency. There's a risk of overspending or settling for inadequate solutions. By following a systematic approach, CFOs can identify the most suitable software, negotiate favorable contracts and use financial resources effectively.

What makes a modern software procurement process?

The traditional approach to procurement is manual and paper-based, whereas the modern procurement process focuses on using a centralized, automated platform. 

Steps involved in a software procurement process

Here’s how a typical organization would go about the software procurement process:

1. RFP research and creation

Suppose, the marketing head raises a request for a new collaboration tool. The procurement team takes the following steps before accepting the request:

• Conducts stakeholder interviews to define and understand the requirement
• Reviews the current tech stack to see if an existing tool can fill the requirement
• Performs market research to identify potential vendors
• Creates an RFP that includes project background, project scope, technical requirements and RFP questions

2. RFP issue and management

Next, the procurement team sends the RFP to the list of vendors they have created. They answer questions and provide context to vendors, if required. During the RFP timeline, they monitor responses and send follow-up reminders to vendors.

3. Scoring and evaluating vendors

When the procurement team has at least three proposals from qualified vendors, they take the following steps:

• Engages with stakeholders to score the vendors based on functionality, implementation and customer success
• Works with IT SMEs to score the vendors on technical requirements and integrations
• Calculates weighted scores to prioritize the most important decision factors
• Compares the scores to select the best-fit vendor 

4. Negotiating contracts

While negotiating terms, the procurement team considers not just pricing and support agreements, but also factors like future upgrades, vendor lock-in, data ownership rights and exit strategies to safeguard long-term interests.

5. Implementing a pilot

Now, the IT team conducts a controlled pilot implementation with a diverse group of end users, gathering feedback on usability, functionality and user experience to fine-tune the software's performance before full disposition.

6. Measuring and tracking performance

The performance of the software is measured against predefined metrics, and the IT team actively seeks user feedback to identify areas for optimization, potential enhancements and ongoing value realization.

When procuring SaaS tools, the procurement and IT teams also evaluate factors like data sovereignty, disaster recovery measures, vendor service-level commitments and the ability to scale usage and adjust subscriptions as needed.

Keep this software procurement process flowchart handy:

1. RFP research and creation
2. RFP issue and management
3. Scoring and evaluating vendors
4. Negotiating contracts
5. Implementing a pilot
6. Measuring and tracking performance

How to optimize your modern procurement process

A streamlined modern procurement process allows procurement teams to have better visibility and control over every step. Here’s what we can do: 

1. Establish clear communication channels

Organizations should ensure that all stakeholders, including finance, procurement and IT teams are aligned and informed. 

2. Promote transparency in vendor selection

Organizations can objectively assess potential vendors by implementing a standardized evaluation framework and clearly-defined criteria. 

3. Leverage technology and automation

Organizations should streamline and automate tasks by leveraging procurement process management software such as Spendflo that takes care of supplier management, contract creation and invoice processing. 

4. Stay updated with the latest market trends and pricing

Researching industry reports, attending conferences and engaging with industry experts provides valuable insights into emerging technologies, competitive pricing models and negotiation strategies. 

5. Utilize data analytics for decision-making

Organizations can view usage patterns, cost trends and vendor performance by leveraging data analytics through procurement process software. 

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5 best practices for building a transformational procurement process 

Switching to a procurement process management software is great, but it isn’t enough. Here are 5 procurement best practices to build an effective function:

1. Consolidate and evaluate your tech stack

Managing various software tools can lead to inefficiencies, increased costs and security vulnerabilities. Evaluate your tech stack to identify redundant or underutilized tools and consolidate where possible. 

2. Establish a cross-functional procurement team

When different teams handle procurement steps separately, cost-saving opportunities are lost. Without collaboration, alignment between technical and business requirements is hindered. For instance, a business user identifies a problem and sends a request to IT, who independently researches options and selects a vendor based on features. The procurement team then focuses on payment without optimizing tool value or tracking ROI. 

3. Implement robust vendor evaluation and selection processes

Inadequate evaluation can lead to suboptimal choices and wasted resources. Hence, you should develop a structured evaluation framework considering vendor reputation, product functionality, scalability, security and pricing factors. Where feasible, incorporate a proof-of-concept (POC) phase to assess compatibility and performance before making a final decision.

4. Negotiate favorable contracts and licensing terms

Prioritizing efficiency may result in higher costs, limited flexibility and compliance risks. Thus, you must negotiate strategically with software vendors, seeking favorable pricing, scalable licensing models and clear support, upgrades and data security terms. 

Leverage your spending analytics to negotiate volume discounts and explore options for long-term partnerships.

5. Monitor and optimize utilization

When software licenses are not fully utilized, it results in wasted spending and missed opportunities to derive value. So, you must implement robust usage tracking mechanisms and analytics tools to monitor software adoption and identify underutilized licenses. 

How Spendflo can monetize your software procurement process

Spendflo optimizes your overall modern procurement process, enabling you to track software utilization, identify cost-saving opportunities and align your efforts with organizational goals.

Our comprehensive suite of tools, including product discovery, contract management, insights, vendor trust metrics and more helps you save up to 30% of your SaaS spend.