SaaS: The Rise of Software as a Service (and its Role in Procurement)
The past decade has seen the extraordinary rise of SaaS or Software-as-a-Service. What is SaaS, and why has it become so popular?
Traditionally, software solutions are installed and run onsite. Applications run on PCs, and if they are tied to a central server, that server is also a PC that’s located on the premises. Data is stored and accessed on the PC that runs the application, as well as the server (if there is one). This traditional model requires a robust IT department that is responsible for the installation and support of both software and hardware, security, and data backup. The software is typically purchased outright, with new versions bought and installed as they are released.
Software as a Service leverages the internet for web-based apps instead of traditional software. It’s a more modern approach, but this isn’t just a case of adopting the cloud because it seems like the cool new way of doing things.
A June 2020 report by McKinsey & Company noted that at this point, all industries have at least a 20% adoption rate of SaaS as traditional on-premises software is pushed out. Professional services have reached 38% SaaS adoption, while manufacturing is at 25%. That report shows the rate of SaaS adoption has multiplied through the decade, but the pandemic has accelerated the trend:
“The ‘next normal’ established during the COVID-19 pandemic will accelerate the footprint of SaaS, given the growth of remote working, the rapid deployment of digital solutions, and the lower up-front costs.”
Why are companies so eager to adopt Software-as-a-Service? There are many advantages—that’s what makes SaaS so compelling. Here are some of the most frequently cited reasons why SaaS is growing so rapidly in popularity:
- The subscription pricing model eliminates costly purchase and upgrade costs and allows flexibility based on the number of users
- Instead of monolithic software that tries to do everything (often letting users down for specialized functions), SaaS is an ecosystem of apps that is each highly specialized and able to complement each other for a “best-in-breed” solution
- Rapid deployment
- Managed data centers mean lower IT staffing costs for customers, freed up space and lower operating costs without local servers, and 24/7 uptime
- Security is managed centrally, and data is stored centrally and backed up by a data center
- Hosted servers in data centers have become exponentially more powerful, enabling the use of AI and machine learning that would not be practical for an on-premises installation
- Faster broadband and cellular internet service enables responsive remote sessions and makes large data transfers practical
- Web-based SaaS apps can be accessed remotely and run on virtually any connected device, including PCs, tablets, and smartphones
Best-of-breed solutions solve one business purpose better than any other solution. They focus on supporting a single business outcome instead of many, so they outperform other solutions that try to do everything. Best-of-breed SaaS solutions—like Arkestro—enable strategic sourcing transformation and have an excellent user experience.
Software-as-a-Service is making big inroads into every industry. It’s also having a profound impact on how functional departments operate. In particular, there are huge wins for sourcing professionals. The procurement office in many companies has been making things work using a hodgepodge of software—much of that not designed specifically for sourcing—and manual processes. It’s inefficient, time-consuming, error-prone, and expensive. Trying to operate using strategic sourcing is a challenge with the many compromises involved. They say a true compromise means no one is happy, which has been largely true when sourcing is compromising on manual processes (it doesn’t have to be this way).
The move to SaaS brings tremendous benefits. The companies making that transition are seeing lowered costs, happier staff, better relationships with suppliers and also gaining a competitive edge.
Here are some of the big wins for any company’s sourcing team—regardless of the industry they work in.
Strategic sourcing requires tracking and evaluating many variables. Delivery dates, transportation requirements, quality levels, currency fluctuations, global and local demand, weather-related events, government regulations, environmental factors—the list goes on. Being able to track all of these variables in real-time, evaluate them, make decisions based on the information, and make projections for trends is all but impossible.
Or it was until artificial intelligence arrived on the scene. With SaaS, AI has moved from university and government research labs to the cloud. Applying the power of artificial intelligence to procurement is a game-changer.
Many procurement professionals spend a large chunk of their time on repetitive tasks. It’s boring, a waste of their skills, and the nature of the work makes it all too easy for errors to slip in. Having massive parallel processing capacity on tap means SaaS solutions can leverage machine learning to automate these tasks. They are completed in a fraction of the time, without error.
Combine artificial intelligence and machine learning, and it’s even possible to automate the negotiation process—not just a time-saver, but a significant competitive advantage.
Single Source of Truth
In a traditional procurement office where suppliers communicate using various methods ranging from email to phone calls, different departments within the company use their own solutions, and legacy systems make integration difficult. Tracking information is difficult. Sometimes it’s impossible.
With a web-based SaaS solution, data is centralized. Access to the system with different levels of functionality can be easily granted to any party that’s part of the transaction, no matter where they’re located. Communications can be kept within the system. SaaS makes it possible to have a single source of truth for transparency and increased efficiency.
How to Experience the SaaS Advantage for Your Sourcing Needs
This one’s easy: contact Arkestro.
Arkestro exemplifies everything that’s great about SaaS, applying the concept specifically to the needs of procurement professionals. From AI-powered intelligent first offers to comprehensive supplier management tools, a demo of Arkestro will show you how to leverage the power of SaaS in a best-of-breed solution for your sourcing team.