Most Managed Service Providers (MSPs) and Value-Added Resellers (VARs) are still stuck in the dark ages of procurement.
PDFs, emails, and offline manual processes are the norm. But here's the thing: these challenges also bring a lot of opportunity. By moving procurement online, you can do a lot of good for your tech services business.
The key to taking advantage of this opportunity is having a solid procurement strategy and the right tools to make it happen.
In this blog, we’ll talk about the common procurement challenges MSPs and VARs face, how to build a strong strategy to tackle them, and what to look for in procurement tools that can really make a difference.
What is Procurement for MSPs? 
Procurement is the stage where you acquire the products and services that will be installed, deployed, and implemented for your customers.
You've built a detailed Bill of Materials (BOM) that outlines every component needed for the customer solution and procurement is where you ensure that each of these components is sourced and delivered as planned.
But procurement is just one part of the broader fulfillment process. Fulfillment encompasses not only procurement but also finance, payments, invoicing, and other backend tasks essential to delivering the final solution to your customer.
Understanding how procurement fits into the overall fulfillment workflow is crucial. It ensures that every piece of the puzzle is in place, allowing you to deploy and install the solutions seamlessly, while also ensuring that all financial and logistical aspects are managed effectively.
Traditional Procurement Challenges
Traditionally, procurement within an MSP or VAR is managed using legacy systems, offline methods, or ERP (Enterprise Resource Planning) systems. These approaches come with several limitations that can hinder efficiency and accuracy in procurement operations.
Provisioning
Many procurement systems limit you to sourcing items only from major distributors like Ingram Micro or TD SYNNEX. And unless you're using a specialized agent service like Telaurus, ordering ISP services may not be possible. This limitation means that much of the procurement software available today lacks robust provisioning capabilities.
Subscription Management
Managing subscription services presents a significant challenge, especially since traditional procurement tools often fall short in this area. Many MSPs resort to using spreadsheets and manual invoicing each month. This inefficiency highlights the need for more sophisticated subscription management solutions.
Funding the Deal
After closing a sale, the next challenge is securing funding for the deal. This may require you to either self-finance or seek external technology finance options (like through a bank), to cover the costs upfront. Navigating this financial aspect can be one of the biggest hurdles in the procurement process.
Approval Delays
In scenarios where multiple project managers are involved, the procurement process can be delayed due to approval bottlenecks. The purchasing department typically controls when orders are sent to distributors or approved which involves reviewing credit lines and financial limits, ultimately slowing down the overall process.
Payment Processing through Third-Party Portals
Processing payments can be tough when relying on third-party payment portals. Customers are required to log in and pay their invoices online through a separate system, adding an additional layer of complexity and friction.
Tax Compliance Issues
Many MSPs either fail to integrate tax calculations into their procurement systems or rely on separate, disconnected processes, leading to inaccuracies and potential financial liabilities. Estimating sales tax in the quoting process is crucial, but often overlooked.
Email-Based Procurement
Many MSPs still email purchase orders as PDFs to distributors, leading to limited visibility and manual data entry.
The risk of errors from manually entering orders and processing invoices is high, with typical service providers sending 7,000 to 8,000 orders per year via PDF. This method burdens both MSPs and distributors with unnecessary manual tasks.
Manual Order Tracking
In a world where customers can track a pizza delivery in real-time, it’s shocking that many MSPs struggle to provide the same level of transparency for large-scale IT projects.
In the best-case scenario, you're copying and pasting tracking information from an email invoice. In the worst-case scenario, you receive nothing but an order ID from the distributor. You then have to log into their portal, search for the order, dig out the package ID, and manually email it to the customer. Now repeat this process 8,000 times a year.
Warehouse Distribution Complexities
In many MSP operations, procurement processes are fragmented across disconnected systems, leading to manual workflows. This often results in delays, inefficiencies, and a poor customer experience.
When orders rely on point-of-sale systems at each warehouse, the risk of selecting the wrong warehouse increases, causing delays and complicating the supply chain, ultimately harming the customer experience.
The Procurement Process for MSPs
Procurement is a key part of fulfillment for MSPs. While fulfillment encompasses delivering on customer commitments, procurement focuses on sourcing and acquiring necessary products and services. For one-time revenue, fulfillment is completed with a single transaction, whereas recurring revenue items require ongoing fulfillment throughout the subscription term.
Here's an overview of what the procurement process looks like for MSPs:
Purchase Order Creation and Approval
Create Purchase Order Request: Initiate a purchase order request based on the approved BOM and project plan.
Approval Process: Submit the purchase order request for approval from the relevant stakeholders.
Procurement Execution
Send Purchase Order: Once approved, send the purchase order to the selected distributor(s).
Order Fulfillment: The distributor fulfills the order by procuring and preparing the required hardware, licensing, apps, and internet services.
Order Tracking and Delivery
Track Delivery: Monitor the shipment and delivery status of the procured items. Receive the Order: Upon delivery, ensure the items are received, inspected, and logged into inventory.
Implementation
Deployment: Install and configure the received hardware, licensing, and apps as per the project requirements.
Configure Services: Ensure all procured services and products are operational and meet the required specifications.
Documentation
Project Documentation: Compile and deliver all necessary project documentation to the customer, detailing the procured and implemented items.
Customer Acceptance
Delivery and Acceptance Form: Send the delivery and acceptance form to the customer for sign-off, confirming that the project meets their expectations.What is Procurement Software?
Procurement software is a digital tool designed to streamline and automate the process of sourcing, ordering, and managing goods and services. It integrates with existing systems to provide real-time visibility, enhance efficiency, and simplify procurement tasks.
Benefits of Modern Procurement Software 
Leveraging modern procurement software offers a range of benefits that can transform the way you manage orders, engage with customers, and streamline operations.
Automation
Procurement software automates repetitive tasks and workflows, significantly reducing manual efforts and human errors. By automating order creation, tracking, and fulfillment, you can streamline your operations and minimize delays.
Customer Experience
Procurement software provides real-time tracking and updates. Unlike manual methods that rely on emails and PDFs, modern software offers instant visibility into order status, keeping your customers informed and satisfied with timely information.
Digital Ordering
With digital systems, you can easily manage orders, choose the best warehouses, and process transactions without the hassle of manual, error-prone methods. This speeds up the procurement process and reduces the risk of errors.
What to look for in Procurement Software?
With many procurement solutions available, it's essential to choose one that offers key features that support the needs of MSPs or VARs.
Purpose Built for MSPs
It's important to choose a tool that's "vertical," meaning it's purpose-built for the IT industry. Unlike generic solutions, vertical software is designed with the specific needs and workflows of Service Providers in mind. It addresses industry-specific challenges, integrates seamlessly with other MSP tools, and offers features tailored to manage the unique aspects of IT service delivery.
Provisioning Capabilities
In telecommunications, provisioning is crucial for preparing and equipping a network to provide new services to users. Your procurement software should offer robust provisioning capabilities to streamline this process, ensuring that services are ready and available when needed.
Finance Management
Look for software that can handle both the funding of projects and receiving payments from customers. Effective financial management is essential for maintaining cash flow and ensuring that all transactions are processed smoothly.
Client Portal
A comprehensive client portal is essential. It should allow customers to track their orders and make payments in one convenient location.
Customer Review Process
Incorporating a customer review process within your procurement software can help you gather feedback and make continuous improvements. This feature ensures that you can address any issues promptly.
Shipping Tracking
Having the ability to track shipping directly within your procurement software allows both you and your customers to monitor the progress of deliveries, reducing the need for manual updates.
Tax Capabilities
Your software should automatically calculate the taxes owed on invoices, ensuring compliance and accuracy in your financial reporting. This feature helps avoid errors and potential legal issues related to tax obligations.
Programming Subscriptions
If you offer managed services, your procurement software must support the seamless programming and fulfillment of those subscriptions. During the sales workflow, subscription details—such as term length and billing frequency—are captured for each item in the catalog. This data is then utilized in the fulfillment workflow to ensure that subscriptions are properly set up and managed. The sell workspace should flow directly into the fulfillment process, allowing for a streamlined and efficient transition from sales to service delivery.
Integration Capabilities
Your procurement software should integrate seamlessly with existing business tools like ERP, accounting systems, and e-signature solutions, ensuring data consistency and creating a connected ecosystem. It’s crucial that the software connects with digital distributors, enabling smooth communication and order management.
Workflow Automation
Automated workflow management is essential for a seamless transition from sales to fulfillment. Look for software that supports customizable workflows, allowing you to efficiently manage each step from requisition to approval and purchase orders. The system should facilitate a smooth handoff between the sell and fulfill workflows, using workspace modes to ensure that orders are tracked and managed effectively throughout their lifecycle.
Order Management
Look for software that centralizes all order information in a digital database, similar to what you’d find with platforms like Shopify. This allows you to track both manual and digital orders that need to be fulfilled. The system should also support manual order entry alongside automated processes, since not all distributors offer API connectivity. A robust procurement system should streamline order management, ensuring that you have a clear overview of all pending orders and can efficiently manage fulfillment.
On-Demand Service Procurement
Procuring products is not a new concept, however, procuring on-demand IT services is a different story. There are very few if any, tools available to procure trusty-worthy and standardized IT services that can be integrated within your fulfillment workflow.
It's critical that you choose a system that allows you to access a network of partners and distributors from anywhere, enabling you to support the entire lifecycle of services, expand your service coverage, and match with certified partners to fulfill orders quickly and efficiently. This capability significantly enhances your procurement flexibility and service delivery potential.
Managing Procurement with TechGrid
The TechGrid platform is designed to meet the unique needs of Managed Service Providers and Value-Added Resellers, offering a comprehensive suite of features tailored specifically for the IT industry.
TechGrid provides everything you need to streamline procurement, from seamless integration with existing systems to advanced workflow automation.
Unlike generic procurement solutions, our platform addresses the specific challenges and requirements of the IT industry, ensuring that every aspect of your procurement process is aligned with your business needs.
