SaaS Trends in 2024
Catch CEO Siddharth Sridharan and VP procurement strategy sharing their insights from SaaS trends in 2023, and what lies in 2024 and beyond.
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- Hello, I'm Sadash Ridun,
I'm the co-founder and CEO of SpenFlow.
- And I'm Jimmy Hawzworth,
I'm the VP of procurement at SpenFlow.
- Today, we'll be chatting with Jimmy
about the biggest trends in procurement
and what teams we're seeing for 2024.
First off, I'd love to understand
how you got into procurement, Jimmy.
What was the like, pot?
- Yeah, it's a stupid story.
So I went to school with Dreams of Being a Radio DJ.
Who goes to school to be a Radio DJ?
I don't know.
- Yeah.
- Got my degree in media.
That's why I've been given the production crew hell today.
Got my degree in media and honestly,
one of the things I realized was
I didn't see as much opportunity
because radio was dying, right?
It was already in decline.
It was living on ramen noodles
in a very, very small place and said,
this isn't what I want.
So I moved back to Atlanta with the family
and actually got a job as a buyer for a reseller work.
And so they would buy heavy machinery
and fix it and repair and then resell.
And what I learned there was I loved buying.
I love negotiating.
Like it was fun, it was exciting.
So went through that path,
kind of went on a crazy journey of buying IT hardware
then to buying roller coasters for an amusement park,
then oil and gas.
And then to consulting.
And so consulting was good
'cause I got to see a very big,
this is at the Shelby Group,
I got to see a very big gamut
of different customers from Pfizer to retail,
to manufacturing to SaaS.
And it was fantastic.
And at that point, I really started to love SaaS more and more
and came across Gong who was hiring
and built out their procurement org and it was a blast.
And so for me, watching procurement in this 20 year window,
not I feel old, in this 20 year window,
I really got to see how we went from doing faxes
and picking up a PO off the fax machine
into the world of now we're sitting across the table
from leadership helping make strong decisions
for the organization, right?
- Yeah, yeah.
So Jimmy, what are the biggest trends you saw in 2023
that actually banned out, right?
Like what was something that you predicted worked out
or something that didn't work out?
- Yeah, I think 2023 was a really interesting year
in that you had a lot of microcosms of like,
we'll call it market pressure.
So initially in 2023, CFOs were pressuring CPOs
and procurement folks to find savings, right?
We're in the middle of a recession, the markets come down,
everyone was like, oh, it's gonna end, it's gonna end,
but it was an ending.
And so you're doing a lot of contraction.
You're finding which tools you can exit.
You're having an as procurement and as finance
to go negotiate with your stakeholders
across the organization and figure out,
hey, which tools can you lose?
Or we're building in practices of like really digging
into usage, really understanding what modules
are being used and not being used.
So it created some, what was once very specific behavior?
Really like broad behavior trends across the org.
So it wasn't just some companies are doing this now,
all companies are starting to look at this
and consider pretty important.
- The, actually one of the points that you pointed out
was cashy contraction, right?
So how did you see that effect on internal stakeholders
as well as the windows, right?
Like that's a tricky kind of equation.
- Yeah, so with the internal stakeholders,
contraction's hard to roll with
'cause they're now they're saying
is you not have to do more with less.
That's what everyone's asked to do.
So all these tools that were nice to have, they're gone, right?
Nice to have, unless it's giving you ROI
is no longer important.
So you're making those changes.
And so now you're vendors who, especially in the SaaS world,
are potentially customers as well,
are going through that same scenario.
And so it becomes a really big game
of relationship management.
Of how do I create empathy with both the stakeholder
and the vendor to find common ground to say,
hey listen, we have to turn this off for now
or we have to ramp this down for now.
And we're going to kind of bring it back
into play in the future.
It was very challenging.
We actually some things came up like true down language, right?
Versus all true ups or opt out clauses
or building it opt in language for ramp.
And so it was honestly 2023 early with that contraction was,
it's where procurement got to shine.
And so now as you moved further in the year,
we see expansion starting to happen.
But when expansion happened, it didn't happen
like it did in '22 and '21.
In '20 where everyone was buying SaaS
'cause we're all remote, right?
What happened was it became very thoughtful.
So the themes of usage, of modules,
of understanding our use cases and requirements
stuck a lot more even into expansions.
We moved into what I call conservative expansion, right?
So we know we're growing, but we're gonna grow the purpose.
We wanna be thoughtful in all of this.
- I think it's also caused a lot of empathy
on the vendor end as well, primarily because they understand
where their customers are coming from
because they're probably going through that internally
as like SaaS users themselves, right?
So we saw a lot of vendors who weren't that empathetic
before get a lot more empathetic today, right?
Like and that's actually playing out.
So the other side of this is,
finance is probably sitting on,
sitting on all of this decision making fatigue,
that they're like, "Hey, great procurement is my,"
so I'm go to person for doing this, but it's hard, right?
Because finance has to make this decision across the board.
So what do you think are some temporary shifts
that's happened to finance and procurement
versus permanent shifts?
- Yeah, I think from a temporary side
and we'll start with finance, right?
Finance temporarily really was asked to ratchet down
and they're the ones who have to find
the dollars and the savings across the org.
So the pressure from finance to both stakeholders
and procurement to make some really tough decisions was real.
I think as the markets open back up,
finance is still very thoughtful in managing that spend, right?
They're the stewards of the bank account, right,
for the organization.
So they're gonna make sure that the money we're spending
is providing a great return.
In that pressure, they've now though kind of said,
we do wanna include growth.
We do wanna give people the opportunity to find automation,
to be more efficient, to create more value.
And so it's come up, but they're just a bigger part
of the conversation.
I've never seen finance as involved.
In procurement, usually it was kind of like,
yeah, you have budget run with it.
Now it's, let me understand your use case.
Let me understand what you wanna do.
Let me understand what your desired outcomes are,
what success criteria are.
They're asking those questions, which is great,
which means they're better partners with procurement now.
Because procurement used to ask those questions.
And finance sometimes would say, well, you have budget.
It's like, yes, but, right?
And so now there's a lot less of that.
So temporarily procurement felt pressure from finance.
We felt pressure from the business.
The business didn't wanna contract.
Finance one and two contract.
Now it's to a place where I think both parties realize
that procurement's the bridge to getting the desired outcomes
versus managing the spend correctly.
And so with those two things in play,
everyone's just been happier.
And now procurement's also there to build a relationship
with the customer with the vendor,
which is good.
Our vendors are now partners.
They're no longer just when we buy a tool from,
there's someone who helps us achieve the outcomes.
- Yeah, so that I think is a permanent shift, right?
Like the relationship between procurement and vendors
are actually becoming better.
They were doing the contraction phase, it was hard,
but after they've gone through that
in the, like it's like a battle almost, right?
Like now they've come out of it as friends almost.
- I mean, they went through the same thing.
And that's what's crazy is the recession created empathy
with both parties, it wasn't there before.
- Yes, it didn't exist before
because it was a very one way type of conversation.
What do you think is like something permanent
that's happened to procurement?
- Honestly, I think it's,
we go back to the more with less.
I think procurement has had to move
to this relational more strategic role.
Meaning that we're not there for transactions.
Before procurement was seen very much as a transactional
between my P.O. so I can go buy something
or purely due to diligence on an RFP, right?
I think due diligence still exists.
I think through automation,
transactions have kind of gone away
or they were a thing of the past.
It's the expertise in managing the relationship
and being creative and finding the value.
We're now seen as strategic players
to kind of help company initiatives.
We're brought into M&A conversations.
We are heavily working with IT on rationalization efforts,
businesses when we're building out new programs.
They're bringing procurement to kind of start,
"Here's my requirements.
Here's what I want to do."
Versus just bringing like a sole source solution saying,
"Buy this, buy this."
So it's nice, it's a good fit.
The challenge is, and this is where
like companies without procurement struggle a little bit,
is they have finance trying to fill this role.
And finance, these are very smart people.
But they're doing a lot of other things.
And so to take the time to really understand use cases
and be creative in solutioning and be part of the solve,
that's a big ask.
And so that's where it's like lean on
super-curment experts to come in
and help make those solutions.
Campaigning for procurement teams,
I think it's important that that bridge
is starting to be experienced earlier and earlier
in a company's formation, right?
The later you bring in procurement,
the harder it is to kind of fit in that relationship.
But also I think like there's another shift
that's become almost permanent is that
procurement is not gonna get like head contact issues.
- They don't, no they don't.
It's the more with less.
And then so it's interesting, in my past,
I've had to go and advocate for head counts.
And I'll go and I'll say, you know,
I'll be like, listen concurrently,
when we're working on deals,
at the level that we need to work on them,
a buyer can do X.
And the response I get is,
"Okay, we'll make them do double that."
- Yeah. - Right?
And it's, listen, it's a fair ask
because I think a lot of individuals
don't know what goes into a really smart procurement.
It's not an easy lift.
There are some that are easy,
but a lot of them there's complexities.
There's a lot of negotiation.
There's taking time to understand
what the landscape looks like.
- Yes.
- And so if you do that, and if you do it right,
I mean a procurement can take,
like let's lose your SaaS procurement for example, right?
A simple SaaS procurement may take a couple hours.
- Yeah.
- And you think, "Oh, a couple hours just to renew."
Got to get contracts signed.
Got to look at legal language.
Got to understand if there's opportunity,
"Oh my gosh, InfoSec."
Hey, hey, guys.
Favorite team.
- Yeah.
- But there's just a lot of checks you have to do.
And then as you go into something more complex,
let's say you're buying AI, right?
Or you're buying a data link.
All of a sudden there's just an extra amount of effort
you have to put into understanding the problem
and solving correctly.
And I've seen those deals go anywhere from 10 hours
to like 30 hours, 40 hours with work.
- Yeah.
- And if you can show me teams that have people sitting around
to take on 40 hours of the work, that's hard.
And it's hard to quantify because you don't know
as a leader when those deals come up.
And so to give former finance leaders
a little bit of leeway,
it's tough to justify hiring another head
to solve for what is a more dynamic workload.
And so you're seeing more and more of that, I think,
whether it's outsourced or done through GPOs,
like people are finding ways to kind of offset
the more with less.
Yeah.
- So Jimmy, what are your top three predictions,
emerging trends that you're seeing for 2020 fall?
- Yeah, I think what we're gonna see,
and this comes from people engaging procurement earlier now
in companies life cycles,
is we're gonna move away from like a decentralized procurement
world.
And why I say that is we all experience what it's like
when there's no control and everyone kind of has freedom
to buy what they think they need to grow, which is great.
Like you wanna feel growth,
but you wanna do it with a mindset of protecting
the company's long-term investments.
And so now seeing that,
I think the decentralized model is gonna take a large shift
to center led, which is procurement is guiding the award.
You still may have the department wise experts
driving out some conversation,
but you'll have kind of that overall,
like how we think about procurement,
how we think about buying,
how we think about my stewards moving to procurement.
The other thing that I think will be interesting,
and I'm kind of curious as well to see myself,
is I think we're gonna start seeing AI play a factor,
and I can probably dive in on this forever,
but meaning in how we look at sourcing data,
how we look at understanding what's going on
in the market and trends in different categories.
AI just isn't about creating content.
AI is gonna start becoming more and more about research.
And so leveraging AI research to empower your experts,
I think is gonna be something towards,
especially towards the end of the year,
we're gonna see take off.
I know there's smaller companies doing it,
and so we'll see what happens.
And then the final piece is we've moved from buying suites
to buying best of breed,
or being willing to embrace younger disruptors in the space.
And so we're seeing a lot more disruptors
who survive the recession,
really start to make an impact,
kind of ride the wave back up.
And so as procurement,
it means that we're gonna have to spend more time
understanding who's real and who's not real,
while also empowering our organizations to use those tools.
And not just say, no, you can't get that,
go buy the big Cadillac,
because the big Cadillac may not be the fit
that that group wants to use to achieve success.
The other shift I'm seeing is that a lot of procurement leaders
are turning into strategic influencers.
What's like a path to actually get there for other procurement?
Or should all procurement leaders be strategic influencers?
- All procurement leaders should have a TikTok
or an Instagram, right?
Like they should be riding the wave
with their company social media.
No, I think it's,
I think for someone to create that power in the organization,
they have to have a voice,
and they have to have a platform
that they're willing to stand on.
You should be trying to educate your teams.
So don't just do procurement to execute procurement.
Do procurement to teach people what it means.
- So the other trend I've actually been noticing
is that a lot of procurement leaders
are actually becoming strategic influencers
within the organization and outside.
Two questions.
One, should all procurement leaders
be strategic influencers?
And second, how do they become strategic influencers?
That's the path.
- Yeah, I think first one, if you're a procurement,
you should have a TikTok and Instagram,
like go on shopping sprees and fantastic trips, right?
No, I think yes.
When we say influencer,
procurement is now a relationship at an influence game.
And so you have to be able to move people in a direction
that's going to still get them the outcomes they want,
but also drive more value for the company.
And so it's hard, it's not easy.
Like one of the things I do when I come in somewhere
to establish influence is you do your listen and learns, right?
I go through and I spend 30 minutes or an hour
with leaders like a VP of IT.
I know what your roadmap looked like.
And then I start asking questions during that conversation
to show empathy, interest, et cetera,
so that they now want to bring me out on the journey
and want my opinion as we go through the process.
You don't want to come in and try to just put controls
on everything and say like, you know,
here's the handcuffs of procurement,
you're not getting out of it, you can't buy what you want.
You want to come from that place of empathy,
we talk about it.
That's the key theme, empathy.
And you want to really create a desire from them
to seek your advice, to make sure that what they're doing
is going to, I don't want to say, please procurement,
but please finance, right?
Solve the problems that they need to solve
while having it as less friction as possible.
And so from an influence standpoint, that's where you stand.
I think too, as we talked about with all the smaller tools
now in the market, as people kind of ramp
and there's just a lot of different new categories,
you also have to be able to like guide people
to the right tool for the org.
And this is something that we like working with InfoSec
is really important.
You could have a tool that is fancy and beautiful and great.
If it can't get through InfoSec,
you spend a lot of time designing a process
around something that won't work.
So work with your procurement partner
and let them come and engage to help you find a tool
that fits and also sell it to your other controls
in your organization to help get it's where you want
for a release.
- Makes sense.
- You reference AI in your previous conversation.
And how do you think AI is going to help
because it's just the buzzword right now, right?
How do you think it's going to help procurement leaders
in your view?
- AI is kind of, it's a unicorn conversation
because everyone has talked about it.
We know the legend.
Some people have seen it in various degrees.
But what is it really going to become
when it actually is in existence?
Is something that's interesting?
I think all tools have some component now of AI, right?
It's whether it's a creation of a template
or a little bit of content or analyzing some information.
For procurement itself,
you're asked to now to do more with less.
That's where AI comes into play, right?
How can I find automation?
How can I help myself with,
I mean, it could be as simple as drafting
some RFP templates or things like that for your org.
AI can do some of that.
Shouldn't be the end all be all, right?
You take what you get from AI and you make it your own.
You make it better.
I think that's the challenge that people run into
as they explore it is they'll take AI and they say,
here's my paper, give me 100, right?
And that's not the case.
We know how to score against that now.
So you'll use it to kind of offload
some of the more trivial task.
What AI cannot do for us yet
is it can't replace the expert.
Meaning AI can't listen to a use case,
understand, call out more requirement questions
from a end user to really understand what they want
and then translate that into a set of tools.
It may one day, it's not there yet.
That's a very advanced thought process that has to occur.
I always say that being a buyer is being a consultant.
You have to know how to ask why.
You have to know how to dig deeper
to get to the real problem.
AI is not a consultant.
AI right now is an entry level processor.
Yes.
That can work really fast.
And so while we wait on that to come into play,
I think it's using it for more of that entry level work,
which will actually allow us to accelerate
the growth of the people on our teams.
Because if I have someone spending less time
on drafting very simple things,
then they can spend more time on learning about the market,
learning about the tools that are out there,
learning about what's changing in the space.
I always say that there's a place for tactical roles,
but tactical roles don't grow as much as strategic roles.
So strategy makes you think,
tactical makes you just execute.
You want both, but I want people who can think and execute.
So AI is there.
I think AI will help people move through
once again the tactical faster
so they can spend time on really influencing New York.
Makes sense.
And so I'm actually gonna play an Uno reverse card.
And I wanna see like a CEO,
especially CEO of a procurement company, right?
From a software company,
where do you see AI kind of starting to influence
and impact the market?
I think it's three, the way we think about AI as well,
and the way I think about it personally is that
there's like a, there's three fundamental type of frameworks.
There's like a framework which is a bot
and a co-pilot and an insight, right?
So AI can be applied in all three,
where there's a lot of the tactical work
that you're talking about.
A bot could actually do.
Answer a couple of questions on,
"Hey, what's going on with this particular procurement?"
All of that can actually be done with robot
and doesn't need the tactical resource
or the human in the loop for that.
Wherever a human is required in the loop
is where a co-pilot can actually come in, right?
And to assist the human in a particular documentation work
or an RFP creation or in your contract,
somewhere in that type of workflow.
- Yep.
- And the third is like the ultimate way
I should think about it as an insight,
where today, like, you know,
procurement leaders have to sit down,
figure out what do I need to renew for,
what do I need to think about,
what's the strategy for this,
renewals for the next coming quarter,
how do I need to forecast this renewal out,
what's my spend on this particular tool,
all of that stuff.
AI could actually probably do that for you in the future, right?
And that's the strategic thinking as well.
I think AI will be able to do the strategic thinking
a lot quicker than we think it's possible.
And then from that strategic insight,
the bot can actually take over from that.
So I actually look at it as the loop,
the bot, the co-pilot and the insight,
the insight invariably powering the bot.
- I think it's to your first two points, right?
And the third one would love to see it,
I think we're far.
- Yeah.
- But the first two, I just wanna like summarize.
So you see it as it's an enhancement, not a replacement.
- No, it's an enhancement, for sure.
I think you might be able to optimize
on that additional headcount down like the road
in like two years from now,
but is it gonna like necessarily be the person
conversing with your internal stakeholders,
conversing with your vendors to actually make this happen?
No, it's not, I don't think it's there yet.
But it's definitely going to help them do more strategic work
and take the tactical off, which.
- No, I like it.
I think it's good insight.
- Yeah.
- Awesome, so Jimmy, can you summarize in a couple of points
on how other companies or other procurement leaders
should plan for SaaS procurement excellence?
- Yeah, I think it's, to go back to some of our themes
from earlier, right?
The first one, and you leaned on it heavily,
which I think is great, is be an influencer.
Don't just be someone who's reacting
to the state of your business.
Be someone who is up in front of the decisions
that are being made,
so you can kind of set yourself up
in an agile contract with these tools
so that you have the ability to flex
as the market changes, 'cause let's be real.
The next couple of years, it's gonna be a volatile market.
It always is, like we're still ramping,
but you never know when it's gonna stop or slow down,
and you wanna have levers you can pull
to protect your organization.
So that's one.
The other one that I think really, it matters a lot,
is surround yourself with the right partners
and the right people.
When you go out and get your, you know,
build your teams, or you build your orgs,
or you find people in order to work with,
make sure that you're educating them
on what procurement is,
so that they can really provide the value
for your customers internally,
for your vendors externally, like the relationships,
and then for your back office folks,
like the Infosec Finance legal,
merge those relationships,
'cause that's a lot of times where it falls apart.
And I think the trend is now,
how do we bring all those together?
So it comes down to influence,
and it comes down to people.
I think, you know, the other things,
whether it's tools, tools are gonna,
are changing, you're gonna have to look at those,
but start with those two pieces,
and the rest will fall in the place.
- Awesome.
- Thank you so much, Jimmy, for joining us today.
- You're welcome.
- Hey, be sure to smash that follow button,
- Yeah.
- And subscribe.
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