Step-by-step guide to the software purchasing process

Before submitting a purchase request or purchase order for the software buying process, examine your budget and consider whether you have enough money to support your needs. You may have to reevaluate your spending in other areas, but fitting the purchase into your own budget is the easiest option.

If you don’t have enough money, then you’ll have to find the funding elsewhere. Work with department heads and C-level executives to examine the projected yearly budget and gain an understanding of where your company stands financially.

Next, consider the total cost of ownership (TCO) — including direct and indirect costs over the technology’s entire lifecycle — for the product you’re looking to invest in.

Determining the direct and indirect costs of a software implementation depends on your line of business.

For example, if you work for a management consulting company and the application in question is used to produce consulting deliverables, then your purchase and deployment of project management software can reasonably be considered a direct cost.

Next, consider the licensing costs. These will likely vary greatly depending on if you want an on-premises, software as a service (SaaS) or private cloud offering. Licensing can also vary based on the number of users that need access to the software.

You’ll also want to consider setup and maintenance fees. While the bulk of on-premises software costs are paid upfront, the vendor may charge annual maintenance fees of 15% to 25%, including security patches.

Other costs for on-premises subscriptions address interoperability, ensuring that the software works well with existing systems.

Furthermore, there’s the accounting aspect to think about. On-premises software is generally considered a capital expense — except for the annual maintenance costs — while SaaS is considered an operational expense.

Other costs to consider when calculating the TCO include data migration, training and hardware.