AI-Powered SaaS Procurement: Benefits, Strategies & Risks

It seems like AI is in every single SaaS tool in the market, with organizations' adoption of AI more than doubled from 2017 to 2023. Procurement tools aren’t the exception. 

That’s because AI-powered tools allow you to automate processes, get answers to questions, and analyze large volumes of data quickly. However, AI also comes with risks, especially due to data security and regulations. 

In this article, we explore the current state of AI in the procurement industry, its benefits, use cases, and challenges.

Understanding AI in procurement

We’ve all seen the growth of AI, especially in generative AI and natural language processing (NLP) models that appear to understand humans and logically respond to us.

When it comes to purchases, AI-driven solutions help businesses simplify procurement operations and make analyses with computer algorithms.

With the help of AI, procurement teams and heads of department can reduce the time spent: 

• Reading contracts
• Making forecasts and predictions
• Summarizing large amounts of data to gather insights
• Entering data on systems 
• Processing invoices
• Staying on top of contracts and renewals

Additionally, AI optimizes operations by automating approval workflows and cutting costs by preventing payment delays. It can also assist in evaluating SaaS tools by addressing concerns related to data security, system compatibility, and costs.

AI can help you automate procurement workflows and renewal notifications, but it doesn't replace the knowledge and experience of purchasing professionals and SaaS negotiators.

To get personalized advice and competitive quotes, speak to our pricing experts on demand.

Key benefits of artificial intelligence in procurement:

Here are some of the ways AI in procurement can positively impact your business and day-to-day operations:

• Increased efficiency by reducing time spent on manual tasks, such as making data entries
• Enhanced cost savings by comparing historical supplier data and analyzing contracts to identify cost savings or avoidance opportunities 
• Improved data analysis of your suppliers' datasets to give you multifactorial answers
• Better supplier relationships by building and training chatbots to answer your vendors’ questions in real-time and offer them a better experience
• Reduced errors by conducting more in-depth reviews of your potential suppliers so you can make more accurate purchase decisions

How AI can transform SaaS procurement

With AI, you can ensure that your procurement processes run smoothly and free of errors. Here are practical ways in which AI can simplify SaaS procurement for your business and teams: 

Process automation in SaaS procurement

Before finding the right vendor, you can use AI to help you build automated procurement workflows that trigger an approval chain based on the content of the intake form. 

At this stage, you can also use AI to automate internal sourcing processes to cross-check procurement data and determine whether you’re already paying for a similar service or need to source a new solution. 

Picture this: A marketing employee makes a purchase request through your system for a social media scheduling tool that works for TikTok. AI can automatically cross-check your data and identify if you’re already paying for a similar tool. Then, it can either notify them of any existing subscriptions or proceed to the next step in your procurement workflow.

Thereafter, AI can help you automate compliance checks, process invoices, and track spend by triggering alerts and reminders.

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Strategic sourcing and supplier evaluation

AI helps you identify and evaluate potential suppliers by analyzing bids and segmenting them based on performance and risk. 

However, you should be aware that tools relying solely on AI to assess your options could have limited access to market benchmarks, which might make it difficult to determine fair pricing.

Compare this with Vendr’s pricing data, which is based on community insights and having negotiated thousands of SaaS contracts.

Spend analysis and budget management

Another way in which AI can help in procurement is by analyzing your SaaS spend data and finding opportunities. AI can divide expenses by category to analyze patterns and find cost savings opportunities. 

For example, an AI tool could find and list unused software licenses, highlight discount opportunities, and tell you when your subscription is up for renewal, which is an opportunity to negotiate more favorable terms. This allows you to spot spend patterns and anticipate future costs. 

With a spend management tool, you can efficiently manage inventory, avoid missed contract milestones, and optimize supplier relationships

Supplier risk management

When paying for SaaS suppliers, you need to anticipate risks regarding the company’s financial stability and reputation, its data security practices, and geopolitical issues. 

An AI tool can analyze deep pools of data with financial statements, geopolitical developments, data security policies, and market trends. Then, use this information to make predictions about potential risks associated with suppliers. 

For example, when given the right information, an AI system could in theory flag a supplier whose financial stability is in question. This would empower you to ask about it during negotiations or choose another option. 

Contract management with AI

AI tools can skim and analyze contracts to identify key terms, obligations, and potential risks. This is critical for SaaS procurement as it supports effective contract management and can make sure you’re notified of any requirements regarding your subscriptions. 

For instance, if you've agreed to a pricing model that includes tiered pricing based on usage, AI can alert you when you're approaching a new pricing tier, helping you manage costs effectively and avoid unexpected expenses. 

Generative AI in procurement

Generative AI like ChatGPT can also be useful to procurement by creating documents, conducting supplier performance assessments, and yielding insights from large sets of data. 

For example, you could use ChatGPT to draft supplier evaluation reports, summarize key points from lengthy contracts, or generate checklists for onboarding new suppliers to ensure all necessary steps are covered.

These are potentially very useful time-savers — but any generative AI tool needs to be safe from data leaks. Since generative tools learn as you use them, setting up a secure or internal solution could delay those benefits.

Risks and pitfalls of using AI in procurement

There's no question that AI offers SaaS procurement multiple potential advantages. However, there are important risks to consider that can affect your operations, reputation, and finances. These include:

Data privacy and security concerns

When using any AI-powered tool, you need to identify whether the data model will use your information for training purposes and if there’s any risk to your data security. This review is one of the reasons why AI purchases take 21% longer than non-AI purchases.

There are also other risks associated with AI tools for procurement. For example, if you handle health-related information, you need to follow HIPAA regulations. This means you can’t share sensitive data with any SaaS provider that doesn’t sign the BAA (Business Associate Agreement) — and ChatGPT isn’t HIPAA compliant. 

So, using ChatGPT to create documents or analyze supplier contracts potentially places your third-party data at risk. Similarly, granting AI-powered spend management, purchase order (PO), or bookkeeping tools access to your data could create a compliance risk. 

This can have serious consequences since failing to comply with data regulations can expose you to heavy penalties and severely impact your brand’s reputation.

Over-reliance on AI

While AI can help simplify and automate tasks, it can’t replace or think like a procurement expert. Relying purely on AI or similar technologies can also lead to unseen mistakes due to a confusing prompt or a lack of meaningful real-life analysis. Also, by solely relying on AI, you risk becoming so dependent on it that you lose essential institutional knowledge in case the system fails. 

Plus, since most AI systems are still relatively new and learning, they still make mistakes. Failing to properly review its output could result in damaging supplier relationships, miscalculations, or missing out on effective discount levers.

These risks are important to consider when incorporating AI into your procurement and SaaS management strategies. That’s why a balanced approach like Vendr’s is crucial—one that combines automated workflows with industry expertise and data. 

This way, you can streamline internal processes while leveraging market intelligence to make well-informed decisions on pricing and supplier negotiations.

Ultimately, procurement relies heavily on human skills, relationship management, and negotiation. AI can’t effectively manage all these responsibilities, but it can increase efficiencies when used strategically.  

Vendr’s role in AI-powered procurement

AI can help you review contracts, analyze a SaaS provider’s reputation, and identify cost-saving opportunities. 

But relying heavily on AI can put data privacy at risk. It can also leave you open to a seemingly obvious error in judgment, like missing hidden costs or fees, or misinterpreting the terms of your agreement. 

This is why Vendr's solution to SaaS procurement includes both automated procurement workflows and industry intelligence. This way, you can standardize and simplify internal processes, and review benchmark pricing for popular categories and SaaS tools. 

Plus, if you ever need an extra pair of eyes on your processes, deals, and tactics, you can ask one of our experts.