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SaaS in Procurement: Top Reasons Why Companies are Choosing the Cloud

September 01, 2015 by Hillary Ohlmann

SAAS diagramDoes your procurement function run on-premise or in the cloud? If your procurement function is not using a cloud-based, software as a service (SaaS) solution, then you should reconsider. While software as a service is not new, only in the past few years have organizations really begun taking advantage of all the benefits it has to offer, and this has led to remarkable growth in the cloud computing market.

Gartner, the world's leading information technology research and advisory company, has predicted that by 2016 cloud computing will take up the majority of new IT spending. In fact, Gartner says SaaS spending is expected to reach $22.1 billion this year, up from $14.5 billion in 2012.

A report put together by Software Advice analyzing market trends shows that more and more companies are moving to cloud. They surveyed a number of businesses on their preferences for on-premise versus cloud software deployment. They found preferences have shifted dramatically between 2008 and 2014. In 2008, 88 percent of the companies surveyed preferred on-premise deployment. By 2014, that preference had completely reversed - 87 percent of companies now prefer cloud deployment.

There are many reasons why companies choose SaaS over on-premise software.

Lower costs
With SaaS solutions, there are no pricey hardware purchases nor are there expensive local installations. Lower upfront costs mean a quicker ROI. Costs savings don’t end after implementation, either. You won’t have to pay for additional upgrades or maintenance since all of that is taken care of once on the vendor’s end.

Speedy implementation
When you don’t need additional hardware or local installations, you don’t just save money, you also save time. Buyers need to manage the sourcing process (including everything from purchase orders to transactions, invoicing, and spend data) using a solution that allows them to interact in real-time, so the less downtime needed for implementation, the better.

Easy to update
Traditional on-premise solutions often require costly updates that may only come once a year. SaaS solutions are updated on a continual basis, and these updates are then deployed to all customers immediately. This also means bugs get fixed faster, and vendors often take customer experience to heart when they’re developing new features.

Simple to scale
If you find yourself needing to add more users, simply change your subscription. Again, there are no physical changes needed on-site in order to scale up. Conversely, it’s also easy to scale down, and you won’t have any costly systems sitting around going unused.

Optimized for usability
SaaS vendors focus on building an excellent experience for all their customers across the board. The high volume of users means the vendor is consistently getting feedback about platform usability, allowing them to constantly tweak their product and ensure a great user experience.

Try before you buy
Since SaaS solutions can be accessed through a web browser, vendors frequently offer limited access to their solution before you pay for a monthly or yearly subscription. Being able to try before you buy is a big advantage. This way you can test several possible solutions and find one that truly fits your organization’s needs.

At the end of the day, though, the biggest factor when trying to decide between cloud or on-premise software is total cost of ownership: for on-premise software, this will be much higher. In addition to the purchase price, the company also needs to include initial setup costs and the price of future updates and maintenance in TCO calculations.

Some SaaS naysayers may cite the lack of customization as a reason to go with on-premise software. While it’s true that a SaaS solution may not fit your processes 100 percent, you have to consider they’re usually developed with best practices in mind in order to provide value to the greatest number of customers possible. As Simon Hurst and Ian Dagg wrote in a recent article on Spend Matters UK/Europe, “Don't dilute [the benefits of SaaS] by over engineering your processes or spending too much time on things that don't deliver value. It is entirely possible to have a basic, working solution up for people to see within a week.”

If the research proves correct, cloud solutions will only increase in popularity across all market sectors. Currently customer relationship management (CRM) buyers lead the way in cloud investment, with Gartner predicting that SaaS and cloud CRM deployments will reach 50 percent of all CRM deployments by the end of 2015. Obviously the folks over in Sales and Marketing have already jumped on board the SaaS bandwagon. Procurement would do well to follow suit.


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Hillary Ohlmann

Written by Hillary Ohlmann

Hillary is DeltaBid's resident writer, copy editor, researcher, and all-around procurement enthusiast. She holds a degree in Journalism and Spanish from UW-Madison.


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