How to Create an Efficient and Cost-Effective Procurement Strategy for Your Business Technology

Most small teams end up with a collection of technology rather than making any real purchases. There’s likely to be a project management app, a security camera system, a design subscription that someone bought last spring etc. The company ends up paying for a whole raft of overlapping tools, no one knows who’s got responsibility for any of the contracts and the renewals just show up unexpectedly.

A written procurement strategy fixes this by deciding in advance how your organization identifies needs, compares options, and approves spending. Large organizations have developed this process over many years, and schools and universities are a perfect example. They buy everything from software to security systems, all under a very constrained budget and with a great deal of public scrutiny. E&I Cooperative Services (a not-for-profit) which serves over 6,500 educational institutions is built on the principle that the buyer is better off when they can standardize and share the burden. That same principle applies to any business.

1. Start with what you already own

Before you go out and buy anything new, make a list of everything you currently have in terms of subscriptions, devices and service contracts. For each item on the list you need to note who owns it, what it costs and when it renews. Most teams will quickly spot the duplicates (two file sharing tools for instance, or a number of people all paying for the same app on their own cards). That list is then the basis on which you can assess whether any of your future decisions are actually going to save you money.

2. Define “good” before you shop

Vendor demos can be very convincing so it’s essential to have your criteria in place before you begin. What does the tool need to do? What does it need to work with? Who is it for? How much are you prepared to spend over its lifetime (not just the first year)? Once you’ve got that list, rate each option against it. A written scorecard will help you to pick the right tool rather than just the one that gives the best demo.

3. Don’t start from a blank page

It takes time to run a full competitive bid, and most small businesses simply can’t do that on every purchase. The way most institutions deal with it is to use agreements which have already been competitively sourced. E&I, for instance, has over 260 contracts and claims their members save 5-12% or more on each contract (partly as a result of spending less time on the sourcing). You don’t have to be in a co-op to use this approach really. You can look around for trade association schemes, group purchase options or deals arranged by your peers before you go down the route of negotiating on your own.

4. Put purchasing on rails with software

Once your team is making the regular purchases, eProcurement tools can help cement the good habits. The E&I benefits are clearly money-saving, reduced off-contract spend, improved efficiency, better compliance and greater control. You can choose from a range of platforms, and they will help you set up your catalog so that your staff only see the approved, pre-negotiated items. For a small team, the key is to pick the right tool for your size. A shared request form with a simple approval rule may be all you need for a team of ten. A full platform is the way to go if you have purchases across a number of departments.

5. Build review into the calendar

A strategy only works if there’s someone accountable for it. Pick one person to be responsible for the renewals, set the reminders (60-90 days out), and check usage prior to anything renewing automatically. If a tool is being used very minimally, that’s the time to go in and renegotiate, downgrade, or cancel.

A quick starting checklist

• Inventory the current subscriptions, devices, and contracts.
• Name an owner for each one and state its renewal date.
• Write the selection criteria prior to asking for the demos.
• Compare the total cost over the full term rather than the sticker price.
• Check for group or pre-negotiated pricing first.
• Review the usage prior to every renewal.

The bottom line

Good procurement isn’t simply about cost cutting. It’s about making your purchasing process thoughtful, clear, and consistent so that every tool has a purpose. Start with your inventory this week, and the rest of your strategy will be a lot easier to build.