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Technology spend poses a unique set of challenges for procurement. Cost increases, waste and inefficiency, a crowded marketplace, and the demands of growth and scalability are just a few factors that can muddy the waters with SaaS suppliers. Transparency on both sides, from the supplier and procurement, is really the only way to wade through these complexities.
In a recent AOP Live Session, Kelly Barner and I spoke with Logan Furbee, a Senior SaaS Consultant at Vendr, about the different levers procurement can pull to get the most value from their IT providers, especially in an environment where cost expectations are top priority.
We also discussed the results of a LinkedIn Snap Poll where we asked the procurement community about the top sources of IT spend leakage or waste. Unused licenses and redundant solutions overwhelmingly dominated the responses, with shadow IT spend making up a small portion of responses. These pain points are consistent with the trends Logan has seen in her experience negotiating hundreds of SaaS contracts.
This kind of IT waste, she says, is especially common in high-growth companies that accelerated their spend over the last few years without placing the right checks and balances in place to ensure proper approvals, usage, and oversight. Having a demand management framework will help an organization to understand their licenses, optimize usage, and minimize waste. Although this process might seem overwhelming, it is necessary.
“My recommendation for IT spend waste in 2024 would be to think about what you want the next year to look like,” said Logan. “Ask yourself, ‘what are our top priorities?,’ and then find the solutions you need to support those priorities.” For each solution, this means taking a microscopic look at what tiers or licenses you need or where extra support is justified. Looking for opportunities to cut costs is also an option and “make sure all of your contracts are as clean as possible so you’re truly supporting the priorities and not spending where it’s not used.”
This approach can be especially beneficial for procurement in the current landscape where rising IT costs are top of mind. Annual increases can be a bitter pill for procurement to swallow, but, says Logan, there’s always room to negotiate, and procurement should not back down from entering into productive contract negotiations, especially with first-time suppliers. “The worst that they can do is say no, but at least you are making a solid case to really improve this contract and your spend as much as possible.”
