The IT industry worldwide is expected to grow the highest, with predictions expecting a 104 percent increase between 2018 and 2023, as compared to other sectors. Information technology is rapidly becoming an integral part of every consumer’s life. Different types of IT companies are emerging to fulfill the demand of businesses and their other customers.
With expanding business, IT companies must procure products and services from others to continue their operations. Examples include hardware and software, marketing services, printing, office supplies, professional services and other kinds of products and services as per the requirement of different projects.
Managing these spending categories monthly or on a project basis becomes a tedious task for procurement and accounting departments. Preparing purchase requisition forms, getting necessary approvals, placing orders, and clearing vendors’ payments require both time and effort. Above all, if done manually, these processes can have multiple human-prone errors that are even more time-consuming and costly.
Digital procurement systems such as purchase-to-pay software systems can solve all these problems. It can streamline the procurement process by letting employees select items digitally, get faster approvals, provide three-way matching of requisition form, purchase order, and goods receivable note, and provide an option to pay vendors digitally within the specified time.
Benefits of Digital Procurement System
Let’s talk about how a digital procurement system can help IT companies in the following spend categories:
According to a Gartner report, all new companies and 80% of existing suppliers will provide subscription-based revenue models by 2020, regardless of where the software sits. Being an IT company, you rarely make in-house software as they are costly and time-consuming. Instead, an IT company buys software that is tried and tested by other specialized companies.
Software expenditures have shifted from one-time licenses to a subscription-based approach, adding to the complexity and volume of transactions in procurement. A marketing department alone might be using several subscription-based software to manage their campaigns and social media platforms.
Related: IT Spending On Cloud To Surpass Traditional IT In 2025
Procurement software helps optimize subscription utilization by calendarized upcoming pending and renewal subscriptions. In addition to that, it is a huge time-saver when it comes to recurring billing. It also allows managers to allocate the software to relevant teams and departments. A good procurement software also helps to pause and resume subscriptions when teams do not need them at the moment.
It also helps in creating a catalog of all the software subscriptions through which employees could choose which software to go for when they require specific service. Moreover, IT companies can get relevant reports and analytics on software usage to make data-driven decisions.
Every company needs office supplies to support its functions and provide facilities to its employees. Office supplies can include chairs, tables, pens, pencils, notepads, etc. Companies order such materials in bulk for every department in the company. Office supplies come under the indirect expense of the company, which is not adequately addressed in many companies because of their not-so-direct role.
According to Mckinsey, effective indirect procurement management can contribute up to 12% of cost savings. In other words, managing purchases related to office supplies can help IT companies reduce high costs. S2P software can help source the best vendors for different stores and onboard vendors that provide durable and cost-effective office supplies. Moreover, if you want to purchase again, S2P can have all the information saved, which can help in making future decisions.
Advertising and Marketing
Whether you create an advertisement or organize a company event, IT companies need to outsource such activities to other agencies with expertise in the area. Numerous other activities, such as content management, SEO optimization, media buying, digital marketing software, video production, market research, and branding, are outsourced and paid for. Thus, procurement needs to be involved in facilitating this department as well.
As per Delloite, marketing spend is expected to grow by 20%. Handling such massive expenses can be a tedious task. Procurement software can help with all these spending issues effectively and efficiently.
First of all, managing all these vendors without a vendor management system is tiresome. Procurement software can help consolidate vendors offering similar services with relevant background information. Secondly, contract management and future negotiations can be made easy with automation. Moreover, it can help control the expenditure by providing better visibility and transparency into what is happening and who is in charge.
Companies might need to hire professionals to perform specialized tasks such as accountancy firms, law firms, painting the new office, or even pest control. Since digital procurement help obtains the experience of supplier and monitor supplier performance, it can guide the procurement department of IT companies on which vendor to go for.
Among all the benefits of managing services provided by other vendors, digital procurement can help view the expense of certain professional services with the help of graphs and visual aids.
This way, companies can better understand where their company is spending heavily. If the expenditure increases from a specific limit, upper management needs to make certain decisions like hiring a full-time resource or looking for other options.
Digital procurement helps with expense management by keeping departments in line with the pre-determined budget. Procurement systems provide real-time budget information that allows tracking any budget variances that may arise. A real-time control system enables action before issues appear or occur in your purchasing operations, hence preventing financial losses.
In addition, digital procurement software enables procurement departments to catalog pre-approved items so that employees can only purchase materials necessary for the company’s operations. Moreover, with multiple approvals, no purchase can go unnoticed. This limits maverick spending and dark purchasing in the organization, reducing unnecessary costs.
Greater Visibility in Managing Spend
In short, managing direct and indirect spend is necessary for all types of companies. Most of the companies are writing checks wondering if the purchase is needed or not. If a company does not know where it is spending money, it may not be able to manage it. Hence, the most effective way to control spending is to have greater visibility.
To keep ahead of the competition, businesses should automate time-consuming procurement tasks. Procurement software can help link the expenditure with relevant departments and teams. It controls maverick and dark purchasing and removes costly human errors from the procurement process.
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