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It’s a pivotal time for procurement, as purchasing grows more complex and software prices continue to rise.
No three professionals are navigating this fast-changing landscape with more aplomb than Brad Veech, Head of Technology Procurement at Discover Financial; Tropic CEO & Founder David Campbell; and Tropic Head of Procurement Strategy Michael Shields.
In their recent discussion, “Taking Control of Your Software Portfolio," hosted by Tropic, the trio gave tips and pointers for procurement teams across four main areas:
- Defining and practicing “proactive procurement”
- Aligning goals and gaining stakeholder trust
- Leveling the playing field in software negotiations
- Turning software buying into a long-term strategic advantage
Missed the webinar? Never fear. Below are five key takeaways from this enlightening session.
1. Plan ahead and customize lead times
A whopping 81 percent of companies admitted to missing software renewal deadlines within the past 60 days.
To avoid such costly oversights, the consensus is clear: Start the renewal process at least 90 days in advance. Companies that take this proactive approach, compared to those that wait until the last minute, save an impressive five times as much.
“Being brought in way too late creates friction everywhere,” said Campbell.
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Here’s the caveat: Adopting a blanket lead time for all contracts (e.g., renewing all software 60 days ahead of time) can set you up for failure. Different suppliers can have wildly different renewal timelines. For instance, managing Salesforce renewals is vastly different from handling other software suppliers. It's crucial to tailor your approach for each supplier, enhancing efficiency and reducing friction in the process.
2. Use accurate benchmarks and data
The role of procurement is no longer just about negotiating better deals; it's about contributing to the overall efficiency and profitability of the organization.
Access to data and tools, ones that can match the capabilities of the sales teams selling to them, can help procurement professionals focus on their organization’s bottom line better. Specialized teams that focus on specific suppliers can create data asymmetry and help in negotiations. Or, you can get pricing benchmarks for thousands of suppliers in Tropic.
Companies with accurate benchmarks save an average of 21 percent more. This underscores the importance of benchmarking in procurement. By understanding market trends and competitive pricing, you can make more informed decisions and drive greater savings for your organization.
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3. Set goals and align with stakeholders
The need for proactive procurement can’t be overstated and it often starts with internal alignment.
To succeed, it's essential to align your goals with those of your internal stakeholders. What’s important to them in a deal? What do they value besides price? Understanding what their version of success looks like in a deal is the first step to adopting a more holistic, strategic approach to procurement. Additionally, becoming a trusted source of information for stakeholders by providing insights about suppliers and their roadmaps helps build procurement’s credibility.
When it comes to the deal itself, don’t take credit when things go well. “Let the stakeholder be the hero,” said Veech. “Let them present the deal, let them get the glory.”
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4. Source early, source often.
Engaging suppliers well before an opt-out date, also known as the notification period, provides greater leverage to negotiate against price uplifts.
Understanding pricing trends and product stickiness also allows you to push back effectively during negotiations, especially in an environment where consolidation is on the rise.
Think about it: By negotiating contracts that lock in favorable terms, such as zero annual price increases and tiered pricing, you can gain a competitive edge in the market. “Imagine the advantage you could have over your competitors if you could procure your software portfolio at 5%, 10%, or 20% cheaper than they could year over year,” said Veech.
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5. Modernize and simplify procurement whenever possible.
Contract owners inside companies are often busy department heads, and they’re increasingly tech-savvy millennials who value simplicity and immediacy.
Procurement processes must adapt to this mindset by simplifying and automating where possible. An easily flexible and intuitive user experience for end users can drive better compliance with procurement processes.
“If it’s a high-friction process that requires a lot of work from the contract owner, that’s where you will turn people off on the whole concept of procurement,” said David Campbell.
Follow the guidance from this webinar and you’re well on your way to making procurement the hero inside your company (and your CFO’s best friend). If you're needing a procurement boost, learn how Tropic's platform and services can supercharge your procurement team and improve the performance of your entire process.
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