Digitize Your Software Procurement

4 Benefits of Digitizing Your Software Procurement

Digitize Your Software Procurement

As a procurement professional, you're likely spinning a lot of different plates – especially right now. You're conducting supplier research, supporting digital transformation initiatives, managing RFPs, analyzing ROI, and negotiating contracts, to name a few. Among your many responsibilities, there's one in particular that can be a challenge to keep going: managing Tier 2 and 3 software supplier transactions efficiently.

If you're currently tracking software procurement through an Excel spreadsheet – as roughly half of all procurement organizations are doing – then there are significant improvements available to you by changing to a digital software procurement model. At SoftwareONE, we call this model a software digital supply chain.

What is a software digital supply chain?

A software digital supply chain is a procurement practice that uses digital technologies to create efficient software management. It establishes a seamless, integrated set of systems and activities across the procurement lifecycle of software and cloud services – from software demand to fulfillment and optimization to eventual retirement. A software digital supply chain enables businesses to get the right software at the best price, on the right contract, to the right user, in the shortest time.

In this article, you'll discover what it means to use a software digital supply chain and how it can benefit your organization in four significant ways:

1. Improved Operational Efficiency

From a big-picture perspective, business can sometimes come down to an efficiency contest. Any opportunity to tighten up operations and eliminate efficiency gaps gives you a competitive edge.

At SoftwareONE, we studied our customers' software procurement transactions and found that Tier 1 vendors account for about 10% of total transactions (Figure 1). These transactions are also highly supervised. The remaining 90% of transactions from Tiers 2 and 3 don't always receive the same degree of attention. It's out here in the tail-end of the purchasing chain that your procurement team has the opportunity to optimize. Do you know how much time your team spends managing these transactions and renewals annually? What's the return on investment of going to multiple sources to get better pricing?

As you might be thinking – spending twice as much in operations as you are on the software itself doesn't make sense. A software digital supply chain takes that burden off your procurement team, creating operational efficiency through automation and streamlined processes.

Figure 1: Tier 1 publishers account for about 80% of software spending, and 10% of transactions. Tier 2 and 3 publishers account for 20% of spending and 90% of transactions. It's in this bulk of transactions where companies sometimes miss out on efficiencies and cost savings.

2. Proactive Renewal Management

For an organization that manages many different software platforms, renewals can be a continuous task. If you don't already have a system for managing renewals, you'll inevitably waste resources in this area if operated in an ad-hoc manner.

Most likely, you have a process in place for your Tier 1 vendors. You may start the review process well in advance to ensure the software and its related contract are still a good fit for your organization. When it comes to Tier 2 and 3 agreements, you might try to balance the amount of time spent managing them between potential savings.

Automating Tier 2 and 3 software renewals through a software digital supply chain is an easy way to get the best of both worlds. You free up your resources and help create cost and operational efficiencies by not letting the details of upcoming renewals slip through the cracks.

3. Transparent and Trustworthy Data

We live in a data-driven world, but you can only make confident decisions when you have trustworthy data. If the data isn't accurate or available, you'll make choices in the dark.

A recent survey from Deloitte revealed that 65% of procurement leaders have little to no visibility of spend beyond their Tier 1 suppliers. This statistic illustrates the negative impact that the old software procurement model – where teams manage data in Excel and other manual solutions – has on data transparency. If you don't have visibility of the spending happening with your Tier 2 and 3 vendors, inefficiencies are sure to exist in the system.

Tail-end spending is often left unmanaged simply because the cost of managing it outweighs the potential benefits. However, you can turn that equation around when you use a software digital supply chain. With this practice, you'll create cost efficiencies based on transparent data. You’ll be able to keep a close eye on tail-end spend without having to burn through valuable resources in the process.

4. Entitlement Visibility

Once you have transparent and trustworthy data, including around what software your organization purchased, ask yourself: do you know how your organization is entitled to use each software?

A software digital supply chain allows you to see this information in seconds. Under the old software procurement model, it may take hours of searching through Excel, verifying data, finding the original documents, and/or contacting your supplier.

Having full visibility into software entitlement information from a software digital supply chain also sets the foundation for a software asset management (SAM) program – a goal for many organizations during this digital transformation climate. Organizations are looking at opportunities to enhance their SAM program by aligning it with current initiatives like transformation, cloud-based technology, and cyber-security. Capturing entitlements across your portfolio in a single, digital platform makes it that much easier to automate your SAM program.

It's Time to Digitize

Tightening up your operations with a software digital supply chain is an easy way to gain a competitive edge in today’s market. Not only will you operate more effectively, but you'll also manage renewals proactively, generate transparent and trustworthy data, and get full visibility into entitlement information. Ditch the Excel spreadsheets. It's time to digitize!

Get the Free eBook

Want to learn more about a software digital supply chain? Download our Procurement Manager’s Guide to Efficient Software Procurement to discover more about the benefits of going digital.

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  • Digital Supply Chain
  • Digital Supply Chain, Procurement, Software Licensing Management, Software Asset Management, Software Sourcing, Software Tail Spend

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