Is there an easier way to buy SaaS?

Transparency and fairness are highly prized assets for public sector procurements of any kind. Demonstrating a rigorous process that ensures comparisons on a level playing field - apples for apples - makes complete sense.

Procurement departments create lists of potential suppliers, ask them to join preferred supplier lists or undertake a preliminary Request for Information (RFI) and then respond to a Request for Proposal (RFI) or Request for Quote (RFP)

But something doesn’t feel quite right. This model and process have existed for nearly 100 years with virtually no change. Other than taking the whole process online, any changes in technology or commerce that may have shortened or improved procurement have been ignored. Departments still employ armies of people to manage and evaluate responses. And all too often, these people have a limited understanding of the business outcomes people in their organisation seek. Take, for example, this conversation with a senior procurement manager in a major bank a few years ago:

Me: "So Ian, you're helping the bank execute its Agile strategy?" Ian:" Yes, we've engaged two outsourcers in India who are providing 200 developers, designers and project managers". Me: "Great, so how can we help - we're a specialist Agile solutions business that delivers outcomes in a fraction of the time and cost of traditional methods even when compared to off-shore outsourcers."

Ian: "That's fine, but we need headcount - just developers, designers and project managers." Me: "But surely you need people who can deliver real outcomes?" Ian: "Not really - it's a numbers game for a bank our size. It doesn't matter how smart your guys are - what's your day rate?"

Do you see where this is going? Procurement isn't interested in outcomes. They are process-obsessed, ticking the box, measuring their outcomes, not those of their enterprise users.

Something similar happens when procurement tries to buy Software as a Service (SaaS) products. By definition, SaaS is usually a commodity. It's an off-the-shelf solution, and it's cheaper (usually) than building something from scratch. Innovative companies understand that the best way to buy SaaS is to adopt the approach the product offered will never be a 100% fit for their needs. 85-90% might be enough to justify a cheaper, easy-to-install, easy-to-maintain, scalable solution.

But when procurement gets involved, it all breakdowns. The RFP captures a shopping list of requirements broken down into 'mandatory, preferred, nice to have, and optional'. Achieving a 100% fit to 'Mandatory' requirements for a SaaS product is a virtual impossibility.

Then we get to the contract terms. SaaS products are successful because they scale quickly and comply with performance, security and privacy requirements on a global stage. SaaS vendors spend $m setting up and maintaining a security profile that protects their customers. Why would they ever want to change this to suit just one customer? It's expensive and time-consuming and ultimately adds little or no value to the customer.

The final point I'll make on this topic is government authorities' obsession with appointing local suppliers. This fundamentally doesn't work with SaaS unless the product is bought through a local Value Added Reseller (VAR). But even then, it ignores that SaaS vendors are more often than not global, virtual, online businesses. Procurement offices that insist on weighting responses in favour of local suppliers exclude themselves from benefiting from best-of-breed solutions.

So how could the situation improve? I'm not advocating the disposal of procurement functions - far from it. However, there needs to be a reset in the way procurement operates. If the business unit asks for a SaaS solution, capture top-line requirements by all means, but don't ask vendors to adhere to binary answers. Ask them instead to describe how they would address top-line requirements with their product.

Successful SaaS purchases are defined by two things: One - the fit of the core product features and functions - an 85% fit in most cases, and Two - the way customer success is executed, covering installation and ongoing support. Procurement needs to let SaaS companies tell their stories and let their customer testimonials provide validation. Furthermore, SaaS products can be demonstrated easily to show the potential users exactly what the product does and how it does it.

Finally, the pricing. Most SaaS companies have worked out a tiered support system from basic to intermediate to premium. This provides predictable service levels and add-ons. There's simply no need for price breakdowns into line items and hours. Instead, choose the closest fit to your needs and leave it there.

Done sensibly, procuring SaaS solutions can be remarkably straightforward, but it will require thinking outside the box - at least for some.