How to Build the Case for Your Procurement Tech Investment

Asking for any Procurement technology can feel like an uphill battle, especially when the solution in question isn’t one of the well-known suites. It may even cause you to second-guess the recommendation unless you feel confident in the value you expect it to bring. So how can you build a business case that takes the lead and speaks for itself? Here are three steps you must take.

Know the potential ROI of your procurement technology

There’s little worse than investing in something that never pays for itself. Finance knows this from experience and will be hesitant to invest in any technology solution, especially a best-of-breed, without metrics that detail the tool’s long-term value (and cost) to the business.

Of course, countless factors influence ROI. Chasing them all down yourself isn’t feasible, which is why SpendHQ worked with independent research firm Hobson & Company to study the ROI of our solutions and develop tools to help prospective buyers calculate theirs. After interviews with dozens of customers globally, Hobson found that based on a representative business:

• Spend Intelligence users can recoup their investment in less than 5 months and potentially secure an ROI of 660% over 3 years.
• Procurement Performance Management users can recoup their investment in 3 months and potentially secure an ROI of 814% over 3 years.

Wondering what your ROI could be? Calculate it with Hobson & Company’s self-service calculator.

However, the monetary payoff from an investment in procurement tech isn’t the only kind of ROI that matters. Finance and procurement leadership will also want to know how the tool will affect daily work. Will the solution help Procurement find more cost-saving projects? Will it speed up collaboration and reporting? Will it improve the company’s diversity and ESG performance? Don’t forget that people’s time is a cost, so there is a budget element to productivity and resourcing as well.  These factors contribute to the total financial ROI of the solution, but they also have an important qualitative impact on efficiency and stakeholder buy-in that will benefit the business.

Being able to quantify and highlight these non-financial benefits, especially with metrics, will strengthen your business case by speaking to the pain points the tool can address. For example, Hobson & Company turned its customer research into two complimentary whitepapers, complete with customer validations and numbers that detail how Spend Intelligence and Procurement Performance Management can help teams achieve the reported ROI. You can find them below:

• Spend Intelligence ROI Paper
• Procurement Performance Management ROI Paper

Clearly communicate your goals

A detailed ROI breakdown will bring your business case to life, but you still need to show Finance and other procurement stakeholders how you plan to use your procurement tech investment. If you can’t illustrate what it will help you accomplish, your buying committee will be skeptical.

The best way to identify priorities that will be meaningful to Finance is to filter your goals through leadership’s initiatives. How will your proposed solution help Procurement drive the business toward its overarching objectives?

Once you have an answer, make a list of what you want Procurement to accomplish over the next few years. Where possible, set dollar or percentage targets or procurement KPIs to be as specific as possible.

Of course, not every goal will have numerical outcomes, and that’s okay. You may simply want to increase collaboration with stakeholders, streamline the purchase order process, or establish spend visibility. Include those goals in your business case anyway. Sometimes, the qualitative outcomes speak louder than figures.

When you combine your goals with ROI, you’ll have a strong business case that:

• Highlights the impact of Procurement’s work
• Tells a simple, compelling story
• Gives life to the possible outcomes of your proposed investment

Not only will this information paint your proposal in a positive light, but it will also address questions before they’re asked, simplifying the decision-making process, and making “yes” much more likely.

Understand your stakeholders’ needs

Arguably the most important factor to consider when building a procurement tech investment business case is what the stakeholders who will evaluate it need. Procurement is at its best when it works seamlessly with the rest of the business. If your proposal seems like it will make work harder for anyone else, you’re at an immediate disadvantage.

To prevent that from happening, ask yourself a few questions and identify how the solution addresses them:

• What has prevented Procurement from working with stakeholders?
• Are we getting input into what outcomes we want to collectively achieve, and incorporating those goals into our RFP, demo evaluations, and proposal reviews?
• What slows down strategic Procurement initiatives?
• Where is Procurement the bottleneck?
• Where does the rest of the business engage with Procurement the most?
• Are there any areas where the rest of the business seems to be going around Procurement? Why?

This is just a small sample of the questions you can ask to identify areas of value for your stakeholders. The trick is to think of the solution you’re pursuing as the solution to stakeholders’ problems, not yours. If you can put yourselves in their shoes and identify how the technology investment will make their work easier, convincing them to make a purchasing decision will become ten times easier.

Conclusion

In a world of tightening corporate budgets, Procurement knows that saving money sometimes relies on spending it in the pursuit of efficiency and greater procurement abilities. However, not everyone in the business is trained to look at purchases that way. To lock down procurement tech investments in 2024, you’ll need to put on your sales hat and sell the benefits, not the solution itself. Thankfully, the three tips in this guide make doing so fairly easy.

Now, if you’re ready to take the first step to building the ultimate procurement tech investment business case, click below to calculate your potential ROI on Hobson & Company’s exclusive self-service calculator or schedule a custom demo to start uncovering the various ways our solutions can help you crush your goals and solve your stakeholders’ problems!