Most procurement professionals have experience building cost models to support their negotiation prep. They can estimate the cost and amount of raw materials, components, and overhead, determine the potential economies of scale associated with their demand, and face the supplier with confidence.
But SaaS software is a different animal. Traditional cost models don’t work as well, and economies of scale don’t have as much impact on supplier pricing. That leaves procurement feeling at a complete disadvantage at a critical point in the sourcing process.
Art of Procurement recently ran a LinkedIn snap poll that confirms this dynamic. 37 percent of respondents felt that poor negotiating leverage was the top challenge faced by procurement when trying to negotiate savings on cloud software.
SaaS software requires a completely different set of negotiating levers than traditional product categories. It may feel like there is no leverage when the reality is that the leverage is just different.
When procurement has poor visibility into SaaS software spend and demand, especially when there are multiple tiers or packages of software on the table, they may feel blindfolded heading into a negotiation. The answer? Increase visibility into ‘shadow spend,’ SaaS software purchases that have evaded procurement’s processes.
