A House Divided? How Tropic Complements (but Doesn't Compete With) In-house Procurement Teams

Michael Shields
April 11, 2023
8 min read

It’s the age-old “buy vs. build” debate, but for procurement: should I outsource major buying decisions, or hire an in-house team?

After more than a decade as a procurement leader at three global companies, I would argue that the answer is both.

In an unsteady economic environment where cost-cutting is king, the stakes for procurement departments are higher than ever.

Technology helps a company’s procurement team ratchet up savings, manage more spend, and find the right software tools—all in less time. This means the company is likely to invest more in procurement because it produces such a strong return on investment.  

You might be surprised to learn that the customer list for a procurement platform like Tropic includes several companies with in-house procurement departments. Examples: Zapier, Docusign, and FlatIron Health.

But wait—Doesn’t Tropic essentially compete with an in-house procurement team? On the contrary.

Rather than overlapping, Tropic dramatically improves an in-house procurement team’s performance.  

saas procurement

Here are three ways in which a procurement platform can supercharge an in-house procurement team:

1. Tropic helps them negotiate efficiently.

Like many procurement people, I love to negotiate. I know this doesn’t make sense to those who don’t enjoy tension, but for me, I enjoy it. I enjoy the strategy and the creativity. I enjoy the adrenaline (yes, negotiating can produce plenty of adrenaline). Over time, I’ve become pretty good at it.

One thing I’m not good at is sailing, which I’ve heard involves navigating a lot of unknown territory and shallow water. This was especially true before sonar, and it’s one of the ways in which SaaS procurement and sailing are similar.

Using a platform like Tropic doesn’t reflect on your negotiation skills. Using Tropic is like sailing with sonar. Instead of sailors manually dropping leadlines to measure water depth, they now simply watch the depth change in real-time.

Procurement teams of the past may have spent days or weeks rolling out RFPs, adjusting quantities and budgets, and haggling with suppliers. With Tropic, they act on real-time data.

“Using Tropic is like sailing with sonar.”

Because Tropic draws on data points from tens of thousands of SaaS contracts and deals, it arms procurement departments with information about what a competitive but acceptable target price should be.

This not only reduces the amount of time it takes to negotiate, but it also ensures a much higher likelihood of success. In other words: Your company gets deeper discounts more often.

In SaaS software, those discounts can range from low single-digit percentage points to the high 90 percentages. (Yes, I’ve seen plenty of deals that are 90%+ off list price).  

In the end, all stakeholders are pleased with the superior outcomes. I have yet to meet a captain who doesn’t want a safer ship or faster voyage, or a CFO who doesn’t appreciate more savings.

2. Tropic helps them strengthen sourcing.  

Maybe you’re the rare business leader who’s perfectly happy with your suppliers in all areas. The truth is, whether it’s software pricing or some other type of pricing, you could probably get a better deal if you surveyed other suppliers.

One big value that procurement teams bring to an organization is helping identify the best tools to help their teams achieve business objectives.

So many companies stick with under-performing suppliers for way too long. But in a competitive environment like the current one, underperformance is unacceptable.

“In a competitive environment like the current one, underperformance is unacceptable.”

To be sure, switching suppliers comes with risk, cost, and the potential for disruption. But in plenty of scenarios, switching makes a lot of sense, can pull in immense savings, and can be led by a skilled procurement team.

Let’s revisit what procurement teams do.

In the indirect world (and especially in tech), procurement teams are often small and cover a large section of the business.

When I worked at MX, there was a short time when I was the only procurement person for the company. While I’ve got years of procurement process and negotiation experience under my belt, I often lacked detailed expertise about the specific goods or services I was procuring.

I did my best to leverage my network or scour the internet, but in reality, the information I uncovered was meager at best. And, in SaaS buying, the landscape changes rapidly, with newcomers every week offering better ways to tackle old problems.

Enter Tropic again.

Tropic is supplier-agnostic at its core. We know that companies have different needs, and the best supplier for one organization might not be the best fit for another. We work with organizations to understand their true needs and decision criteria, then recommend solutions that were successful for other organizations with similar needs.  

Procurement can be the hero by introducing a new supplier that not only does things better, but also more cheaply. This is especially true in a market where budgets are tight and suppliers are hungry for revenues.

Said another way, right now we’re in a buyer’s market. Procurement teams are, by definition, buyers. The sourcing process can be complex, but it doesn’t have to be because Tropic will make the sourcing easier. It’s like panning for gold with a metal detector instead of your hands. Or finding your keys with an Airtag instead of walking circles around the house. Your choice will be guided, and you’ll achieve better results.

software procurement

3. Tropic helps them expand internal procurement process and manage more expenses.

I’ve networked with many procurement professionals over the years, and I don’t recall meeting any who are looking for extra work because they have time on their hands. In fact, they always seem to be juggling too many projects and wishing they had more staff.  

Many procurement organizations also (by their own or their company’s designs) have their hands tied. For example, procurement teams are only involved in deals worth more than $50K. Or procurement can only support certain departments.

While I generally try to avoid superlatives, I subscribe to the notion that procurement should nearly always get involved in purchasing. Even if there isn’t spend.  

That’s because the value of procurement goes beyond savings. By managing more of the spend, procurement will:

  • Reduce efforts required from stakeholders (which allows them to focus on doing the work they were hired to do). For example, your VP of Sales should not be negotiating software contracts. He should be closing deals.
  • Ensure that policy is followed. Even $0 software “purchases” should flow through legal, infosec, IT, etc.  
  • Apply savings to smaller purchases. Tail spend can make up 20% or more of a company’s overall spend. If procurement involvement generates 15% average savings, then you are saving the company an additional 3% on total spend. That’s impactful.

Whenever you can leverage data and insights to help procurement teams save more efficiently, the decision should be a no-brainer.

Including procurement teams in all deals means you remove the confusion for stakeholders on when to include procurement. The whole buying experience inside your company improves, which will lead to other benefits.

It’s quite the chain reaction—and can be achieved when procurement partners with Tropic.  

Will procurement teams and departments be replaced by technology or robots? Not at all. I believe boosting a procurement team’s results with Tropic can help secure those jobs by showcasing the value of procurement to the company.

To be sure, Tropic works with many companies that don’t have procurement teams, but we also work with plenty who do. The partnership works extremely well.

“Will procurement teams be replaced by technology or robots? Not at all. Tropic can help secure those jobs by showcasing the value of procurement to the company.”

There’s another example in which in-house lawyers leverage outside counsel and tech innovations like e-discovery. Why? Because outside counsel are more specialized and help in-house lawyers get to the right decision faster. E-discovery beats digging through 100 audit documents by hand.

Another example is your resident sales folks. Sales uses an army of tools to help them gain efficiency. CRMs, databases, outreach platforms, conversation tools, etc.  Does that mean the sales teams have to share their commissions with these tools? Or that a company should fire the sales team? Of course not. The company can see that salespeople are better armed with these tools.

Procurement and Tropic are no different. Procurement in tech has been historically under-represented and under-resourced.  

Now the goals and needs of fast-growing organizations have changed. This puts more pressure on procurement. While it seems stressful, it’s also an incredible opportunity for procurement professionals to help companies preserve cash, source better tools, and improve both the margins and the forecasting of margins.  

Procurement teams will either achieve these goals or burn out trying. Tropic is poised to assist procurement teams everywhere accomplish these goals and achieve the glory and recognition they have long deserved. Tropic’s robustness helps these teams take their procurement processes to the next level.  

Tropic + procurement = a match made in heaven.

See you in procurement paradise.

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Michael Shields
Michael Shields is Head of Procurement Strategy at Tropic.

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