SaaS purchasing is an external function
Hypergrowth and scale cause problems for SaaS purchasing. Outsourcing helps.
Show me a company with over 300 employees and I’ll show you a software stack in the hundreds.
The growth and popularity of SaaS is undeniable, revolutionizing the way we work. According to the Q1 2018 benchmarking report on Digital Commerce Trends by 2Checkout, 76% of sales in Q1 2018 were for recurring-based purchases.
SaaS has also resulted in some serious external gains too, with hyper-growth technology companies able to trial advanced features rapidly, offering increasingly innovative solutions to a competitive market. In fact, Blissfully has coined this the ‘virtuous SaaS cycle’. It’s taken root across all functions, advancing at a rapid pace, and it’s hard to keep up.
The problem with autonomy, at-scale.
With start ups came autonomy. Interested in retaining the best of the millennial talent pool and driving growth, tech companies hired fast and prioritised their people. The start up mentality prevailed, and employees grew accustomed to autonomy. Make the best decision for the company, or quickly ask the CEO across the hall (or even on the same bank of desks at WeWork), and make the purchase. The problem with this approach was that quickly, these start ups were no longer start ups. According to Equidam, the average company forecasts a growth rate of 120% in revenues for their first year, 83% for the second, and 60% for the third.
As these companies grew, they built out the IT function. At first, the IT team is a catch-all for all ‘technology things’. This could include new hire on-boarding, identifying security vulnerabilities, recommending new technology to add to the company’s stack, and search for redundancies in SaaS. Like most things, scale, particularly rapid scale, presents serious problems.
As the amount of responsibility for the IT departments mounts, the SaaS stack begins to enter the hundreds. Easy to purchase to quickly solve a business need, the IT team (often with flat headcount) sometime decentralize the purchasing or renewal of SaaS to internal buyer departments, or deprioritize- simply too resource stretched to take a strategic overview of purchasing when security is paramount. And once an organization enters the “growth stage,” it tends to become inherently less sensitive to cost.
Don’t slow down the growth
Nobody wants to be the bad guy, slowing down hyper growth by being the SaaS evaluation bottleneck. Some of the world’s fastest growing companies have found innovative ways to ensure that IT can scale with the business. Specifically, they’ve identified parts of the job that can be managed by other departments or outsourced to specialized teams. Terrifyingly, IT leader’s realize that what once could be managed on a spreadsheet has grown into chaos, and outsourcing became a perfect solution.
SaaS buying and renewal management is at the top of the list.
Companies like InVision, HubSpot, Gainsight and others have gained efficiencies by streamlining how they buy and renew SaaS. Why? Because they’ve realized that their time is better spent building scalable processes and protecting security vulnerabilities vs. on the phone with software salespeople. There’s lots of benefits to this approach, and more and more companies are taking it.
Outsourcing vendor management frees up the time of IT to focus on the critical parts of their job. For high growth companies, this is often security. With the stakes so high, and the prizes for exploiting vulnerabilities so alluring, it’s never been more important to keep things secure. For service providers, security is everything. Without your customers trust, you don’t have a company- and a whopping one-third of all companies have already experienced an insider threat incident, according to a recent SANS report.
Show me the money
Outsourcing can also result in some serious cost savings. SaaS buying and renewal management services can gain visibility and control of the spend, they are used to working with the sales people every day and know the buying and renewal process of your vendors- so they’re inherently more efficient than the department that would much rather be coding. And the coders are more likely to stay when working on the jobs they joined your company to perform.
It’s a difficult mindset shift. IT leaders are used to having control of the tools that enable the company to deliver its services to the end customer. In most hyper-growth scenarios SaaS purchasing just becomes too much to manage, running rampant and becoming decentralized with less and less visibilty- usually until a finance hire realises the scale of the problem. Smart IT leaders are getting ahead of the curve and utilising tools to enable them to see all the SaaS the company currently has, and working with services to help them renew and buy effectively- consolidating in one place with cost savings to be realised. The IT leaders can then focus on those rocketship tech-to-tech relationships and protecting the company from security threats- without all the admin.
(This post was written for vendr.co)