Alrighty.
Welcome, and thank you for joining our webinar today. My name is Michael Shields. I lead procurement and strategy for tropic, which means that I get to be the head of procurement at a procurement company. And if you love procurement as much as I do, then it's a pretty awesome role. I also wanna thank Mandy and and Kate for joining today. I'll introduce them in a minute. But before I do, some quick housekeeping, the meeting is being recorded today, and we'll share that recording afterwards.
And then please, if you have questions throughout submit them in the, questions and answer section. And we'll try to answer them, you know, throughout the the the webinar if we can. So now that we have that other way, let me introduce our panelist. Honestly, thinking back that the past couple of months as we've been planning this you know, Kate and Mandy almost immediately jumped into mind.
Kate is the senior director of strategic sourcing and procurement operations at Nevan. Prior to that, she worked in procurement at Lyft and IBM. She has degrees from Penn State University and the Johns Hopkins University. And so she and I first connected over Zoom just to talk about procurement.
We were networking, and she really impressed me with, number one, her data driven approach to procurement, but also just the organization that she's building at Yvonne.
Literally, it was about a week later. I was on the phone with Mark Meen, and we were discussing the topic. And I was, I think I have the perfect person for the call, and here we are. So, Kate, thanks for joining today.
Yeah. Of course. Thanks for having me. Alright. With the intro.
Yeah.
Next up is Mandy. Mandy is a group manager, atropic, And so if you don't know this, maybe you do. Traffic has a large group of individuals who negotiate on behalf of its customers. And advise them on their supplier deals.
And so over the past couple of quarters, Mandy's team has performed extraordinarily well usually, in my experience, when you have a large team, you have a range of performers. And yet every single person on mandates team is above average in the meta tricks that traffic tracks. And so I think this speaks volumes to her as a leader. And, and once again, thinking about who I should join.
I said, absolutely, let's let's invite know, Mandy, she customers like working with her and suppliers like working with her. And I think that that's a really, really cool outcome. So Mandy, I know you've been atropic for a couple years. Prior that you you worked at Integrated Access Technology Group, and you have a degree from the University of Arizona, which I did not know until I was prepping your intro.
But I'm also an Arizona guy, although I went to ASU, so I'm not sure if we can bond for Arizona or immediately become enemies, but hopefully it's not the the latter. So regardless, thank you for joining, Mandy.
Yeah. Thanks for for having me. Happy to be here. And I won't hold that you're a sand devil against you for now, at least.
That's good. I'll remove that bias. Alright. So look, we're gonna be talking about SaaS buying today strategies for winning data driven negotiations.
And, I just wanna set the tone a little bit. Let's call a spade of spade. So whether you're whether you love negotiating or whether it makes you a little uncomfortable, whether you've been doing it for years whether you're fairly new to it by design, it's stressful. So if you feel a little bit of stress, you're probably doing it right.
And if you think about it, that makes sense because you have two parties who, at least to some degree, have conflicting goals. And and by definition, we're negotiating. It requires strategy. It requires effort, and there's certainly unknown variables and facts.
And there's time pressure and all of this adds up to a little bit of stress. Kate, I know you've been doing this a few years. Anything you would add to that?
Yeah. You know, when we've had these conversations internally, especially with standing up the procurement team, people oftentimes wanna figure out, why is it taking so long?
How do we make it go faster? And by design, the procurement process has these checks and balances throughout different review cycles, different levels of review, different people stepping in and out of of the negotiation.
So I found it interesting, at least at NuVon, people have tried to compare the procurement cycle to a sales cycle, And what I found to be helpful in trying to differentiate between the two is the sales cycle internally.
You're buying you're selling the same set of products. You're selling it to different customers, of course, but you're most likely leveraging the same paper. So, therefore, it's relatively consistent in comparison to the procurement cycle where you're working with different vendors, you're getting different paper, you have different internal stakeholders every deal. So I do think that's an important distinction to, to help explain, why the cycle time may seem longer for sourcing. And to Michael's point, it adds some time, it adds some stress. You have a lot of stakeholders who you're juggling and a lot different competing priorities.
Yeah. That that makes me think about some of the talk I've seen on LinkedIn recently and Mandy would love you to weigh in here a little bit about, you know, specialization versus generalization, because, because k absolutely. I agree with you. Right? I mean, a lot of times we find ourselves in this world where we're covering a very, you know, broad, you know, categories and and really oftentimes managing a ton of different types of spend for a for the the company we work for.
Yeah.
Yeah. To to kinda just piggyback on that, shields. When I started at tropic in twenty twenty one, we were a much smaller team. And at that time, we were completely generalized, you know, jacks of all trades. You're working with suppliers and security marketing, and then jumping over to sales enablement.
So even as a procurement Just just just alright, Manny.
Just to make sure, you you're we were obviously focused on SAS. And so the specialization was like your team was working with SAS providers, but it wasn't like they were dedicated to a certain category. Is that what you're saying?
Exactly. Yeah. So you would be working with, you know, someone in the top supplier of the engineering sector. And then you hop off that call and an hour later you're working with someone in security.
So all within this ask realm, but you're having to switch gears a little bit depending on the category that you're working with. And, you know, even as a procurement professional, someone who's negotiating day in and day out, it added that extra layer of stress when you really don't know the ins and outs of these suppliers. So since then, we have specialized and since specializing, it's taken a lot of that unhealthy stress out of the negotiation process. It's no secret.
The more practice you have in a certain category with a certain supplier the better equipped you are to negotiate to really just level that playing field there. And so with our team specialized and marketing, and engineering, whatever it may be, it really allows us to become the the expert in that respective category.
So to some degree, going back to, like, what Kate was talking about, it's it's almost leveling the playing field a little bit because you are working a a little bit more with the with the same, you know, suppliers and you're seeing them again and again, so you're more familiar with, you know, their their pricing, they're they're, you know, go to market strategy, etcetera. Really interesting.
Yeah. Exactly.
Kaye, I don't know about you, but that's not often the world. I found myself in, you know, having done procurement in the in the tech sector.
Anything you would add on that?
Yeah. The the consistency pieces nice and rare, because oftentimes you have changing sales reps from the vendors. Right? I don't know how often that happens, but it feels often to me anyway.
So I'd be interested to get other people's and the participants' thoughts. So when you have those changing people on the vendor side changing, you have different negotiation strategies and different personalities to be working with. And aside from the people aspect, you have the company. So the vendor themselves, they're changing pricing models.
They're changing their product offerings.
So that consistency would be welcomed for sure.
So if if, If we realize that probably in most cases, out of necessity, because procurement teams are often smaller for, you know, tech companies or managing the indirect space within a company. You know, we're almost generalist out of necessity. I think that is a really nice introduction to our first topic, which is you know, the importance of and and preparing for negotiations.
I think, you know, whether you're a general or a specialist or whether you've been doing it for years or whether you, you're, you're new to it.
You know, and and because of recovering lots spend, good preparation. I know from my experience has really helped me to, you know, get up to speed when when I'm not a specialist or something when when, you know, the first time I read a, an inbound request, I'm like, what is this?
So I don't know, Mandy, maybe let's start off with you. Any tips you'd like to share for, you know, when it comes to preparing for negotiations?
Yeah. Preparing is it's everything.
If you fail to prepare, you prepare to fail. And so you really need to put in that leg work upfront you know, vetting these suppliers, seeing who you're working with and really trying to understand who's gonna be on the other side of the table. And really, all of that starts with engaging early. You can't have a bunch of preparation if you're engaging within a short time frame to the renewal date, for example. And you know, that that brings up a a good point of what topic had, a great LinkedIn post earlier this week, really highlighting the day data that goes around engaging early If you're engaging within thirty days of renewal, on average, your savings are around fourteen percent. But if you increase that to engaging six months ahead of a renewal date, those immediately jump up to thirty nine percent savings average, which is a huge delta, twenty five percent savings there.
And really those savings are significantly higher because you're giving yourself more time. You maintain more optionality and are positioned to employ more levers that you might not be able to employ if you're within that thirty day time frame.
That's act that's some really good data. And I think it arms us as procurement people with, you know, to some degree, like, hey, like, this is the results you can expect. Obviously, you wanna, you know, caveat that a little bit because every negotiation is different. But if you speak in more general terms, you can say, hey, you know, across the board, savings can be twice as much, if if we're engaging early. I don't know about I wanna go back, you know, to Kate because once again, I think we we first bonded on, you know, as as we've stood up procurement functions within tech companies. There were a lot of similarities there. But in your experience, Kate, are our customers, and and customers internal stakeholders, are they engaging that early, or how are you kind of helping them when they don't engage early.
Yeah. A big piece is having the data and the visibility to understand when these deals are coming down your your pipe. So if you know when the deal is coming, then you could better prepare. So to Mandy's point, if you have that information, you know what to do with it.
So, we've come a long way. We're an eight year old company. We have spend data. We have spend visibility.
We now see when renewals are coming up in advance, and we we push the business partners to get their purchase request started ninety days in advance. We're not there yet. We're working towards it. Know Britney on my team is on the call too and she can attest to it as well, but we're making great progress. And I do think those are helpful tidbits to understand of and help, influence the business stakeholders. If if you get these sooner, we'll be able to yield better results for you. So it's collecting the data we have.
But if I heard you and maybe I'm reading between the lines, so correct me if I'm wrong, but it sounds like because you have that visibility, you're not necessarily waiting. In fact, you're going to them and saying, Hey, this is coming up for noel. Can you get a request in? And maybe, like, here's the link to submit a request. Am I, if I understand that correctly?
Right. The onus is on our sourcing team to be proactive and, and work with the business stakeholders to get those in. If the business stakeholders were equipped to to do that on their own, I think that's a dream. Would love for that to happen.
But but so you would love for it to happen, but you're not trusting that it will, essentially. Is that is that right? Which is what's by the way, it's not a bad thing. I think it's it's almost good to hold ourselves accountable to that. Right?
Yeah. Yeah.
Excellent. Mandy, any anything you wanted to put in there?
Yeah. I mean negotiating on tight timelines. It happens more than I think any of us would would like to see, but I mean, the depending on the circumstances, you know, it still can yield strong outcomes. And similarly to to Kate, we'd we do a really We put a lot of emphasis over here at tropic to encourage our stakeholders to kick off conversations and kick off those renewal requests as early as possible.
And one way that we do that is by try to combat the the kind of late engagement is by leaning into our broadcasted insights. For those of you that don't know what broadcasted insights is. It's pretty much exactly what it sounds like. Just an email blast that we'll send out our customers to really encourage them to kick start conversations by providing any relevant insight and information that we get being on the front lines with suppliers daily to to really encourage them to, you know, flag, hey, there's some pricing changes that are coming or sunseted skews and things of that nature to really encourage them to to kick start.
So, Manny, is this specific to a supplier or is this like just general advice like, hey, if you engage early this, but just general best practice.
Yeah. So it would be specific to a supplier. So when we hear of, you know, good good changes and or relevant changes that we think would be important to a customer to to start digging a little deeper in. That's where we're gonna send those information.
Over to them relevant to that supplier and relevant to that customer for their upcoming renewal.
Very, very interesting. That is that is cool. I'm trying to think like how we can internalize, and and I'm guessing, you know, networking or, you know, I'm trying to think how we can internalize this back to, you know, if if you're in house procurement, you know, how can you take a supplier specific data point. And maybe it's like, hey, Salesforce announced a big price increase and then use that to, you know, send a note and say, hey, look, I think we can engage you know, early because, you know, ninety days is a great goal, but my guest Kate is is not every, renewal or not every spend is, is necessarily treated equally. And, and some, you know, maybe sixty days is sufficient where some, maybe you do need to be engaging that six months early. It sounds kinda crazy, but but maybe that's true.
Yeah. That's a good call out. It's it's looking at that spend data and identifying where are the top opportunities and focusing on on those, making sure you have enough runway to be as successful with the deal as possible. And then, you know, the maybe the tailspin, the low hanging fruit, the ones that you don't have as much opportunity to to negotiate.
Those ones can be lesser of a priority so that more of the team's energy can be focused on, projects that we know or deals that we know will will get us a better result for the company.
Yeah. And I don't I don't wanna, like, be super redundant here, but I think this is a big takeaway of, like, we should be tracking you know, what percentage of our renewals that are coming up in the next ninety days or the six months already have requests submitted and created. And then and then use that almost as a as a KPI. One other thing, Kate, and I'm going back to our conversation a couple months ago.
So I apologize if there's you know, if if if this is, you know, something that's not super fresh on your mind. But I remember you said something that that really resonated with me. In fact, I had never thought about it this way. But, you know, you've worked for growing companies.
You know, we talked about Uber and and Yvonne, but you mentioned that as part of your preparation, you analyze and it sounded like across multiple contracts, but the elasticity of of price based on growth and and don't know. Maybe if I understood it correctly, meaning like if you had a contract that was growing, say, twenty percent or had grown twenty percent over the past year, you would expect the price to come down by x percent. I I I hope I'm getting that right, but can you either correct me or expand on that?
Yeah. Yeah. Happy to spanned.
So a little bit of background is I've worked at fortune five hundred companies post IPO and now pre IPO. And in that that post IPO that or even hyper growth stages of companies, you have ambitious headcount projections. You have a great history of this upward momentum, and you wanna take advantage of the the bulk buying opportunities or tiered pricing models. So when we're thinking about, okay, if we know what our headcount projections are looking outwards, but we don't wanna commit now because who knows what could happen? We could build in tiered pricing into our contracts.
And generally, what we found is if your volume increases fifty percent, your price per unit decreases fifteen to twenty percent. So I don't know why this is the example that always comes into my head when I talk about this, but when you think about buying a roll of toilet paper, you go to CVS, you get one roll, that unit for one roll is going to be more expensive than if you bulk buy a bunch of rolls at Costco and the price per unit per roll is less. The same concept applies for software. So something that's gonna be helpful if keeping in mind is you can map out as your company is growing or diff or even scaling down and back. Right sizing. You can make the adjustment of roughly fifty percent increase in volume, yields fifteen to twenty percent decrease in cost.
That is, like I said, that's I don't know why I haven't thought about it that way, but certainly and I don't know if it's just because, you know, in procurement and these types of roles, we have so many calls in the air, but I think that is really, really cool.
Thank you so much for sharing. It makes me wonder if this is also something that AI is going to be able to help with, you know, quite a bit in the future. You know, obviously, you know, once again, we have we have a lot on our plates.
But, you know, AI can take a lot of these datasets, look at trends, look at spend history, look at, you know, patterns across multiple suppliers, and then pull something together that can help us prepare for, you know, these negotiations.
And Kate would love to just, add on a little bit more there. Sorry. Not sure if you had anything to to follow-up to Shield's AI point there. But kind of speaking to to what you were saying of working with different companies and different needs of companies wanting to maybe front load usage as opposed to having that elasticity in those tiers and, you know, committing to that growth upfront.
Maybe in twenty twenty one, that's when everyone was in hyper growth. Everyone wanted to to, you know, lock in the best rates up front. We'd love to get your input on this as well, but what we've seen, you know, mainly over the last year or so is just the customer expectations that have changed needing to have that ability to grow but not being bottlenecked by that growth at the same time, wanting to, you know, ensure that they have the best preferred rates to enable this growth, but, you know, what if six months down the line, we don't meet these growth targets that we committed to in September, and now we're stuck in a three year agreement, and we can't can't rightsize here.
Yeah. And that's why the value of, like, those tiered pricing models really comes into play because you're locking in your minimum commit and you're pre negotiating that growth in advance, vendors will push back on it, right, because they they want to lock in that additional revenue sooner. But if that's too much of a risk for your company to take on, right, you gotta your company and make sure your dollars are being used wisely.
So you could do those pre negotiated tiers. And then as you do flex and buy more licenses, then the review process becomes so much faster too because you don't have to renegotiate.
So that's also a selling point when negotiating with the vendor to get those in place. Is talking and saying, look, we've re we eliminate the admin burden of having you having to talk to me again. In a couple months, it's preset. The approvals will go much faster.
So, yeah, hopefully that's helpful.
I find that as a a huge value add in working with customers is We do not wanna have to go back to this table in in six months as as lovely as the reps on the other side are time is money. And so the more time that you're spending negotiating these terms, is time taken away from business operations.
Hey, like, this is an awesome discussion. I do wanna kinda move us over to the next, point of discussion, but maybe just kinda wrapping up with that. What I hear you both kinda hinting at is clearly the expectation of customers, whether they're internal terminal have have changed. And I would say elevated. Clearly, procurement's more in the spotlight now.
And preparation is one of those things where it can lead to a lot of results. I think unfortunately, sometimes we're so focused on the urgent that some of those more important tasks get push to the bottom a little bit, and maybe we don't get to do that as much as as much as possible.
But, you know, it can help us achieve those higher expectations that customers have of us, which is really, really important because if we can obviously meet their needs, then that's going to strengthen the relationship. And hopefully come full circle to the point where maybe they actually do start to, you know, involve us earlier and and and, you know, to to Kate's point earlier, we're not having to you know, constantly pushed on them. But for now, I think that's that's a little bit of our role. So our next topic, is that of sourcing.
And I'm glad we're gonna spend some time talking about this because like, like, preparation. It's it's a very important. I would say it's a very strategic, you know, aspect, but in this world where, you know, we're we're challenged to do more with less, it's I think it's sometimes one of those things that doesn't get as much attention as potentially it could be, and I think that the upside of doing this is is huge. Maybe Kate, let's let's start with you.
What is sourcing, you know, as as the senior director of, procurement and sourcing. What does sourcing look like at Devon.
Yeah. Sources, we have a environment where we know resources are stretched.
We're trying to do more with less to your point, Michael. And when deals come up, we oftentimes look towards trying to leverage our existing tech stack first.
So I think oftentimes people think you go out and get a competing offer, three bids in a buy. Of course, we would love to do that. Sometimes we do that right to apply pressure to an incumbent vendor. But at the same time, we're also aware that if we do select a new vendor, do we have the internal resources at this time to devote towards implementing a new solution? So we found it super helpful to look at our internal tech tech tech stack, rationalize where possible, leverage those relationships and resources as as much as able. And that's been really helpful for us as a strategy within the software space right now.
Any any examples come to mind?
I am apprehensive to name I put you on the spot.
No. You're good. You're good. I'm just mindful of I I probably shouldn't share our vendor names. Publicly. Totally.
Totally. Absolutely.
You know, Manny, one thing that you and I were talking about recently is is you know, it's tied very much into sourcing, but this idea of rationalization, Could you, like, weigh in on on that a little bit?
Yeah. Absolutely.
And rationalization goes hand in hand with what Kate is mentioning.
When we have what when it comes to sourcing, implore all of our customers to really start with your existing tech stack, and a lot of those supplier or a lot of the the features that customers may have in their tech stack. They don't realize that one product within a tier that they may have is gonna suffice to other tools, for example. And I think a lot of that kind of speaks to the rationalization of the financial impact that comes with migrating or moving to a new supplier as opposed to renewing with an incumbent. So you have maybe, you know, you you're securing a better rate upfront, but you gotta think of the migration fees, the man hours to make the migration, the training that comes with that, and the in just overall driving adoption on a new tool and really time is money.
So if you are for some suppliers, this might be an easy necessary migration, but in others, it it doesn't make sense to make that jump, which is really where the consolidation piece is incredibly important you think about if you have one sales enablement tool, for example, and you've got two other tools that you're paying for that could be migrated into one one tool that's already existing in your tech stack, that helps reduce the time of training, reduces that lift of migration and driving adoption And, you know, on top of all of that, if you can consolidate in one, I'm sure you will be your accounts payable team's favorite person by giving them one less invoice to pay out on.
And, make them happy there.
And, man, did you bring up? Oh, sorry, man.
No. Go ahead.
Oh, I was just going to say, I I think you bring up a good point on There are these internal negotiations that take place too of.
Like, you can have one tool that meets eighty percent of your needs versus five tools that meet fifteen percent of your needs. And can you consolidate it? And what's the give and take to when you think about the broader company, like AT needs, IT needs, that's a a really interesting thought.
Well, not only, and Kate, I I love what you just said there because let's be honest, a few years ago when the company's main objective was kind of grow at all cost, you know, spend was less important and profitability was less important there. And because that was so important companies were willing to buy the premium tool that would potentially eke out a little more growth. If that makes sense. And what we're seeing right now is a big trend where the the ROI bar for a tool has risen and and, or or in some case gone down.
So for example, if it may be more important that, you know, you have fewer licenses that are used quite a bit, but on the flip side, to your point, I want one tool. And and if even if it's not like the the the most amazing to author, it meets my needs. Right? And but that that becomes a little bit of a work.
You said internal negotiations to get stakeholders to kind of see that perspective and recognize that, okay, I can do without the bells and whistles and and, you know, having one tool actually, you know, makes it more efficient.
I think this also goes back to to customer expectations and stakeholder expectations, you know, the expectations of your your business owner are gonna be different than what your finance stakeholders' expectations are. And, you know, you see a lot of companies these days across the board have mandates, you know, to reduce their tech spend by five to seven percent. And so you don't want to forgo any functionality, but to your point, Michael, getting rid of these bells and whistles that we maybe can can do without to consolidate into one tool and save tens tens ten thousand dollars here and there can be the the difference there.
And and it's not always a a trade off either. I I need to corroborate this statistic.
But I saw this on LinkedIn, which, you know, you know, I wanna always be wary of, but I I didn't I didn't cry ahead of time, but it popped in my mind just now. And someone mentioned that, you know, when we're buying SAS, we evaluate less than ten percent of the options open to us. And honestly, it didn't surprise me given how, like, prolific. Clearly, in most categories, there are a few, you know, strong leaders, but there's also a lot of up and coming up and coming customers who are presumably doing something a little bit better or, you know, cheaper.
And so when I think about sourcing, yes, it can be rationalization. Love that thought. Yes, it can be consolidation, but sometimes it can be finding a better fit supplier that will actually you know, help your company perform better, be more efficient and, and sometimes, you know, save money, but maybe that's not always the case. And I don't wanna over rotate on things, but finding that better fit supplier can have huge impact for a customer.
So I guess it kind of begs the questions you know, how do you go about, you know, identifying, you know, potential competitors and, and how do you also move away from this you know, I think group think mentality where we we choose a certain vendor because they're well known or because that's who everyone uses. I I just don't subscribe to the notion that the the right supplier for my company is is necessarily the right supplier for another company.
Okay.
Awesome. So I guess sourcing, you know, once again, I I closed out the last topic with a with a plug about AI and and I think I kinda wanna do here.
Again, you know, we've certainly discussed how preparation's important, but takes time. Sourcing is very similar. It takes time. It takes effort, you know, there's a lot to consider beyond savings. There's, you know, to to Mandy's point. The, you know, the the the the transition efforts involved And and I'm a big believer that, you know, if we we often probably choose a solution that's not completely optimized for our need and And, so having, you know, AI come in and helping match a a business's unique needs with the right supplier, that's that's a pretty, that's a pretty, interesting scenario that I think can dramatically improve sourcing in the future.
Okay. So the next topic we're talking about is called Gathering bias data. And I know we've covered a lot of grounds in in the first two topics so far, then, this this next one is very much an aspect of the core title, what we're talking about, like, using data and negotiations maybe we start off with, you know, kind of defining, you know, the types of data we're looking for here.
Kader Mandy and, you know, thoughts on on what types of data you're collecting?
Yeah. You know, your your type your collecting the qualitative and the quantitative and then both external benchmarking data, but also really important to gather that internal data kind of to Kate's point. Not sure if you wanted to expand a bit further on that. I know you kinda mentioned that earlier.
Yeah. Sure. So I think it's helpful to understand the trends of where what a contract has looked like over the past couple of years? Have you been growing? Have you been scaling back? Have you been adding SKUs? Have you been getting rid of SKUs?
Do they have new product offerings that we should be exploring and present a rationalization opportunity? So really understanding that the current environment of a vendor from a scoping perspective, and then pairing that with the cost changes.
So I always feel you need to understand what you wanna buy first before you get into the numbers because if if what you need to buy is changing, then it's more difficult to figure out what what is the appropriate cost for those items. So that's typically my approach is I'll look at the contract how it's trended year over year. And then get the general sentiment from the internal company of do they like the tool, what's worked well, what hasn't worked well, submitted to your point about quantitative piece and the qualitative piece. Both those two things together paint the whole picture and help you drive a strategy on what do you think will get the best deal for your company?
And that's really interesting. I think a lot of people when they think about negotiating, they're like, great. If I can go out and save, ten or twenty percent through negotiation, that's gonna be really powerful. But to your point, k, what you're saying here is if you collect this data, and we all know that, like, shelfware is a big deal and maybe, you know, we're not necessarily buying, you know, you know, things that we really need. What you said is like you like to define in words that you use the words decision criteria, but you like to define what you're buying before you how did you say that?
Right. The scope.
So the needs versus the liked likes must haves versus the wants.
You could frame it however, would resonate best for your company.
So so, you know, there's a term being thrown out there right now of, like, utilization and, like, looking at utilization where historically maybe we bought more than we need, but But what I kinda hear you saying is it's it's more than just buying the right quantity. It's buying the right line item. It's it's removing things maybe like the support that you're paying for that you don't need.
It's looking at what's working well and what's what's what's not working well to to kinda formulate what you should be buying.
Yeah. And the techenvironment's changed so fast.
Five years ago, maybe we could justify paying extra for SSL.
I'd be surprised if I have to pay SSO today. Right? It should be table stakes. It should be assumed.
It should be baked into the price. It's basic security now. So that's come a long way. So trying to understand how those pieces of the contract have changed over time and, what's fair in the market today?
I shouldn't be paying for it to your point, Michael. If I'm not using your professional services, why am I paying for it?
If SSO is standard, why is it a premium cost? So trying to understand why they're pricing the way they are and digging from their perspective of, why do they think it's important to do that in trying to figure out what the counterargument would be?
Going back to what sorry there, Michael. What you were saying earlier about having to when it comes down to utilization and the stakes being higher on that ROI, that really comes down to the these if you look on like platform based, contracts. A lot of the the the strategy that sales reps will propose is, hey, well, you're getting this and you're getting this and you're also getting this. So We're gonna maximize your ROI here by all of these added features that are included at no cost to you.
But if you really drill down into that data and your utilization, you can uncover that, you know, maybe I'm not using thirty percent of these features that are included in this tier. And then that's kind of where that further understanding of, is this the right tier for me? Can I downgrade without, you know, removing any mission critical features like SSO or whatever it may be? And I think that's a a big trend that I've seen as of late as well as drilling into these, seeing where not only your your license, what are what's unutilized, but to Kate's point and your point as well of just what each skew is being used, which line item?
So so one thing that's really cool that I hear you both talking about here is I think you know, procurement sometimes can get a bad reputation, not not that it's not justified sometimes, but Cutting spend doesn't necessarily mean you're cutting things that you would otherwise want.
Right? So millions are wasted on shelf wherever year. We know that. But there's what I hear you saying is there's lots of savings. There's of, financial impact that can come about by just cutting back to what you need or what you are actually using.
And so if you're thinking about, for example, deploying licenses to everyone within a certain, job description. Maybe not everyone's using that tool. Maybe you pull the spend or the utilization results to say, hey, this person hasn't logged in in in ninety days. And so we can we can remove that license never logged in. That's that's really that that's that's a cool and almost more of a positive note than saying, hey, we're taking away a tool that you need. You we're we're taking away a tool that you you don't that you don't need. I know, by the way, the business can either save this money and help towards profitability or or reinvest in a tool that's actually going to be used.
And even drilling down it a step further on these users, this user hasn't, for example, logged in in ninety days. And when they did log in, what were they doing? Does this license tier that they have contracted to them make sense for what they're doing? Are they just going in and viewing are they actively using all of the bells and whistles that are included in that specific license tier?
You know, I I have to say I'm still really surprised and and an off put, by the way, when I go into negotiation and the salesperson, the account manager, they're presenting proposals that are too big for my needs. You know, like, hey, you're and then and and it says that you're using hundred licenses right now, here's a proposal for for one hundred and twenty. And I'm thinking to myself, like, okay, so I saved ten percent per license by but I have to buy twenty percent more. Like, that's that's that's that's a really good way to start off the negotiation on a bad point or a bad foot. But it but it's happy a lot. I don't know if you're seeing that, but I I certainly do.
Yeah. And and, it makes me think back to that kind of unit economics discussion before on Yep. As you're buying more, the price per unit will decrease, but the total contract value will still be greater. Right? So that's a win for the vendor. They're seeing that growth be reflected in the total dollars that are are being committed.
But, yeah, that that is always fine. It's account. What is the incentive here Or where where am I supposed to be excited about this deal?
Yeah. And looking back, they say, well, in the last, you know, twelve months, your your usage has remained flat, but kind of leaning into to what this growth could be and with the the unit economics. And I think a lot of times, what I've seen is you go to these conversations maybe that wasn't, you know, the first proposal that they come out the gate with and just a initial discovery call and they're setting the stage. And if you're setting the stage of, hey, you know, budgets at the forefront, you know, everyone's expectations are a lot higher. We have firm budget restraints that we need to stay within. And they come back to you and say, well, we can we can, you know, decrease your rate, but we'll need ten percent increase in overall spend in order to do so. And that doesn't doesn't bode well to with the finance team and, with the procurement person on the other side as well to to Michael's point.
Yeah. That that's that's the that's that conflict I think we're seeing. I mean, like, I think, you know, there's this idea of this win win, but that stress that's created is you have these account managers who you know, are expected to grow the size of their accounts and you have, as you said earlier, Mandy, the customer expectations is no, we need to cut our tech stack by five, seven, ten, thirty, forty percent, whatever whatever that that number is, and that's where it's, you know, creating some of that friction. But The reality is is we oftentimes don't have the lever of growth to pull anymore.
And so that be makes negotiating a little bit tricky because, you know, we're we're wanting to bring down our costs while in some case buying less than we were before. And and, and I think the best way to do that is by looking at what we truly, truly need because it's gonna be hard to just negotiate lower pricing without that unit, non possible, but hard without that unit economic. So very interesting.
That that brings up a really good segue into this next section that we're talking about, like, developing a strategy in the negotiation.
Certainly you know, negotiation we know is an art. It's not something that, you know, you can just deploy the same.
You know, few levers time and time again and and expect, you know, results. Right? If if if that were the case, you know, they wouldn't need, you know, creative and and strategic procurement folks. So, developing a strategy, may maybe I'll start off with Mandy, you here.
Is there, any thoughts that come to mind in terms of, like, maybe a lever you seem to be working that seems to be working well in this this, can market we find ourselves in or or, you know, timing of levers? What what are your thoughts there?
Yeah. Absolutely. First thing that comes to mind, and I'm sure All the procurement professionals on this call will agree. If you take one thing away from this call, do not show all of your cards all at once.
The timing of levers is is everything. You know, if you're going into a negotiation and you're forthcoming about your growth, about, you know, intent for a multi year and any other concessions that you may have, you exhaust all of your levers all out once and then the pricing that comes back isn't in line with what your expectations are, then you find yourself in a tight spot. So it's really important, you know, to taper your your lever and to the the second part or first part of the question there of what levers are we seeing most commonly in in this certain time is what we've been saying, you know, really drilling into your data and evaluating usage.
In addition to that, as I mentioned earlier, timing, timing's everything. I if you aren't engaging early, then you lose a lot of that optionality. And I think of a recent example working with a customer on, our expert advisory. And if for those of you that don't know what the expert advisory approach is, traffic is one of the offerings where, you know, our customers are leading the conversations.
You know, they're on the front lines negotiating, and topics really just in the back at helping support helping develop that strategy and ensuring that these business stakeholders feel equipped to negotiate.
And in this specific exam, but just to be clear, Mandy, it's it's used, it's doing that because of the specialization that your team has, right?
It's like, hey, we work with the supplier. You know, a dozen times it can. And therefore, you can, like, for me, I know when I've used that tool, it's super helpful because I go into a negotiation with a supplier, maybe I worked with before or very often. And so talking to someone in your team who's dealt with them time and time again, it helps me ramp much quicker. Yeah.
Absolutely. And, you know, we even got the opportunity to to do one together.
That's really good. That's right. About months ago, that was fun.
Yeah. Having that specialization, you know, seeing these suppliers day in and day out, knowing the nuances, knowing the levers that are important to them, it's it's really helpful, you know, because you can go into a call and spin your wheels on a multi year, but if a multi year isn't advantageous for that supplier, then you just wasted some time there.
That's really interesting. And actually, I know we're I know I'm kinda jumping around a little bit, but let's talk about that multiyear deal. Kate, I would love your impact. What I've seen is customers were burned. You know, when they did these multi year deals that were growing over time, and then they did a rift, and all of a sudden they're like, Hey, I don't need two hundred license.
I need a hundred.
So they've they've gone to this other spectrum where they're like nothing more than one year and and maybe six months if they can do that.
It's it's been quite the pendulum. Shift.
The reward needs to outweigh the risk. Yeah. When I think about multi years, it's helpful. At least thinking of the different market that you might be in. So enterprise companies, think Fortune five hundred companies, they're established. They've been around a hundred plus years in some instances.
They have great forecasting. They have years and years of reliable data depend on it and be able to understand what the future may look like. They've surmised.
Thinking is we don't have that. And that's it's the situation. Right?
Yes. So to get to the point, multi years would be great for them. Why not? Why not lock in the the discount of a multiyear deal if you you have that stability and assurance that you're going to be with this vendor for a long period of time and the scope isn't going to change.
As an an eight year old's company, I strongly advise against more two year deals because oftentimes the the proposals of two, three years. That's a substantial amount of the lifetime of our company.
We just can't lock in. There's too many there's too many variables changes of leadership, changes of headcount, changes of business needs, changes of our product offerings. And it's a really exciting place to to be. At the same time, it's it there's a lot of variables that you need to account for. So getting the benefit, the benefit of a discount for a multi year deal doesn't outweigh the risk or the rework, that'll most likely have to be done in a year's time to rip and replace, to rescope the contract.
So I I think it depends on your company where you're at in your maturity life cycle, and is the reward really there considering the risks that may come with it too.
And I I don't think you're saying this. Maybe you are, and we can disagree with this because I agree with basically everything I I I think you're saying I don't there are gonna be exceptions, I would say, for for any time. Of course. Yeah.
Yeah. And so I I don't think it's like always like, hey, I I also strongly advise against multi use deals in many, many cases. And then there are that one where, like, look, in reality, you know, let's be conservative here in terms of, like, our headcount. And we can always, you know, increase that.
But this may be a situation where the incentive is there. But but I also wanna go back to, Mandy's point is, may be honest, there's data that suggests that It may not even be that appealing to a, a supplier for a I mean, some really love it, but some don't. Did I hear you say that correctly, Mandy?
Yeah. Correct. Yeah. Some suppliers, you know, especially in if you're looking at usage base, you're locking in and that that growth. It doesn't make sense for them from a business model to sign you up to a a two year. If you're locked in at a certain tier because if it's a one year, then at the time of renewal, then they can, you know, right size you and and increase those rates there if they're not doing so already with overages.
So, okay. So if I just kinda tie those two ideas together is the lose lose situation as we lock ourselves into agreement, but we don't get anything for it because the customer or the supplier doesn't really care. But in in in, especially as we're dealing with, like, young tech companies, you know, Kate, what you're saying is, like, like, unless there's a really compelling reason that off that the that the reward offsets the risk or or we feel much better about our, you know, our, our growth projections than we we should probably just avoid that risk a little bit.
Gosh, the time is going by really, really fast. The last topic is is during the negotiation. And it may sound crazy, like, hey, we've been talking for fifty minutes, and now we're just getting to during the negotiation.
But the reality is is a lot of the work for negotiation should happen prior to the negotiation. If you're collecting the data, if you're, you know, looking at the the the trend reports. If you're putting together a strategy, then the negotiation will probably be less I mean, use your words, Mandy, less unhealthy, tension. There's tensions can be good, but unhealthy tension, not necessarily the case.
And so a lot of the work is leading up to negotiation. If you do that correctly, then the go smoother and probably quicker.
Anyone anyone anyone wanna disagree with that thought?
Hi, Greg.
There's always there's always right things that could happen, chain the business needs can change. You may not wanna pursue the deal anymore, projects get prioritized, reprioritized.
But generally, right, if you if you do the prep work upfront, the deal should go smoother.
Okay. Good. And then, Kate, are you are you always pushing for that win win?
Thanks. So, Michael Mann and I have talked about this before, and I I may have a bit of a hot take.
Okay.
Often time.
Yeah. Oftentimes with negotiations, you hear people tell a partnership. We want this to be a win win, and I don't think it always has to be a win win.
As a procurement professional, we are the ones who are cutting the check to a vendor.
They they want our business. They need our business. And it's okay if it's not a win win, if it's in the best interest of your company because that's your job. Your job is to get the best deal possible. Now what does that best deal mean varies depending on your company?
I know, Mandy, you had some points on not to sue your thunder, but on Right? If if a win win for your company is a long term relationship and a strategic partnership, then, of course, you don't wanna be burning the bridge.
However, if if you have the leverage and you hold the cards, it's okay to use those to make sure that you're operating in the best interest for your company.
A hundred percent. And completely agree with the hot take.
I would say that, yeah, it really just depends on what your your needs are.
To the exact point you called out. If you're looking for a long term, you do not wanna burn that bridge immediately in every renewal coming up is gonna just make it more contentious, more difficult, and really sever that relationship there. But, you know, if you know who you're working with on the other side of the table and you are an added value of just being a customer to them depending on, you know, who their customer base is, then you do have that upper hand, and it might not be a win win for them.
Yeah. Like, I I I subscribed to the notion of a win win in a lot of cases. I think when I think about a win win, I I wanna make sure I think about the long term, you know, benefits for both companies. But ideally, like, I'll be honest with you.
Obviously, first and foremost, I want to focus and and support the business that I work for, but I also don't wanna do that to where in this in the long term that the negative effects, outweigh the the positive effects. And so I think this idea of a win win can help create that long term partnership. But I also agree with you, Kate, that sometimes you don't need that. Sometimes it's a it's a quick, you know, hey, don't need that.
And so that shouldn't necessarily be factored in. So I'm I'm probably somewhere in the middle there.
I know we're We are so close to being out of time. I wanna answer some of these questions.
And, because they're coming in right off the press here, I I don't know that I wanna maybe just either one of you kinda jump in. But here's one that says, how do you work with the supplier when you are experiencing a retraction in your business?
You bought ahead, but you did not hit the target, and they wanna penalize you, for that renewal with the price increase or other unfavorable terms.
A way to flip that on them is quantify that underutilization in the contract and ask for it back as a credit or roll it into the next agreement.
So if you're pairing back your contract, and reducing the scope, you shouldn't be penalized in the sense of that you're paying more.
Going back to those unit costs, it will be unit costs increase slightly short, but that total contract value should be decreasing. And you've actually given them free money over the course of the contract term. So make sure you call that out to them and say, hey, we've overpaid you for services that we didn't receive, and we wanna be compensated for that in the terms of dollars, a credit, or roll it into your next contract, as some ideas.
Into going on that go ahead.
I'm sorry.
Looking back to the historical data, look at your previous and renewals prior to that. See where your your volumes were falling then. And so maybe you are reducing at the time of renewal, but over the life of the relationship you have still seen growth and relying on the those previous rates to ensure that they're not, you know, spiking your your your rates higher than you previously were paying at a lower volume is also really important to to reference.
Well, and one trend that I'm seeing is A lot of suppliers are pushing their prices up right now. We've seen more price increases from the supply base in the past twelve to eighteen months than than I've seen in the past three to five years, honestly, in my experience, and it all comes down to leverage. So you you what cusp companies fall into one or two camps, those that accept those because either they don't have the leverage and they have to or those that are actually able to not only abate that, but actually drive savings. And so it comes back to engaged in early developing your alternatives sourcing because what they care about a lot is also churn.
And if and if you represent legitimate churn, then the leverage goes in your favor. And if you say, hey, look, I would love to work you. I really would. I would love to continue this partnership, but my cost have or my, you know, budget has dropped by twenty sense.
So if we can't make that happen, unfortunately, I'm gonna have to ex not only explore, but move to one of these other options, which, you know, meets by needs, maybe doesn't have all the bells and whistles. So that's that's where the sourcing engaged in early comes comes in in handy.
Another question here should procurement be the internal team responsible for managing the ongoing utilization of licenses throughout the term? Or is this evaluation something procurement should be doing renewals sourcing events, etcetera?
I've got some thoughts, but if if someone wants in to jump in, by all means.
Yeah. A a thought that comes to mind, I think it depends on what you're sourcing. Team is organized.
If you're part of a CIO organization, I could see it potentially being part of your purview.
But if you're more of a finance, function at your company.
I do think it's more relevant to the IT professionals, the ones that admin the licenses, the ones that track access to tools and and manage access to tools.
But, Michael, what do you think?
I I do see it often within the the organization, them tracking it. That being said, I can encourage them to track it. I can help show them the value of it tracking, but at the end of the day, If no one is not, if if people are not tracking it, if IT's not tracking it, then I'm going to do it to some degree. Even if it's, you know, once again, ninety days before the contract renewal say, hey, some I just did this the other day.
Went to the supplier and said, hey, can you tell me you know, who's logged in the past sixty days. Who's logged in ever? How many, you know, in this case, they were the they were they were creating something. How many have been created and and then once again, I took that information because it benefited the outcome I was trying to achieve the biz the the business outcome.
And so going back to the first point about should we be the ones going to stakeholders and saying, Hey, this renewal is coming up in sixty, ninety days. Can you create a request in a perfect world, no, but I also think that, that benefits us if no one else is doing it to do it. And then you're simultaneously helping the business see the results. So we're kind of a stop gap until they do it.
And that's my that's kind of my thoughts.
Here's another question. I have seen that the stick here, the supplier, the less they care about locking you in for multiple years, since it actually eliminates the opportunity for them to uplift you since there are less frequent renewals.
A hundred percent. Yeah. You see a lot of the value of that is being proposed for multi years these days is Hey, signing will tell you you're the the value you're getting. We're not gonna provide additional discounting, but we'll lock you in. We'll waive your over your uplift. So When these big name suppliers market leaders, they know that you're not moving off of them. And if you are, you're already starting before you're renewing for another year, they are not as incentivized to sign multi years because then you're, you know, losing that anywhere from five on the low end to eleven plus percent in a price increase year over year.
Yeah. I would I would agree that I I mean, look, that's what I would do if I were a super sticky supplier is is, you know, I wouldn't necessarily do the multi year deals. There are sometimes conflicting, sometimes what's fairly good for the supplier might not might miss might be a different, you know, than what the salesperson or the account manager cares about And so there's some selfish, priorities that sometimes you can, you can play. But obviously, your job is to try to make their product as as less as sticky to some degree to to offset that risk.
I know that's a very quick answer to probably a much longer question. I also look at the clock and and recognize red a time. Look, I am first and foremost a procurement enthusiast. So if we didn't get to your question, like, this is a legitimate offer, like, reach out, ping me on LinkedIn, you know, my email shields at tropic app dot I o.
Like, let's chat, let's connect. This is something I'm I'm very enthusiastic about. Thank you so much, Mandy. Kate, really appreciate your time.
Your insights are incredible. The the the expert expertise and experience that you have is is very, very clear, and and thank you so much.
Thank you.
