Rethinking procurement: From service contracts to software products

For decades, organizations approached software procurement the same way they approached other large-scale projects: as a bespoke service. In the service-oriented model, buyers expected big upfront investments, defined through long scoping processes. This made sense when software was scarce, and custom development was the only option.

The economics of software has shifted, and barriers to entry lowered. The easiest time to build software is always tomorrow, and as such, productized software and subscription platforms now dominate. They’re built once, scaled across many organizations, and continuously improved through recurring subscription models. This shift has been profound for industry.

Yet, many buyers still evaluate software through a service procurement lens.

The result? Friction on both sides of the table. Vendors are forced into outdated processes, and buyers risk missing out on the real advantages of the product model.

This article explores why that mismatch creates friction and how shifting procurement practices can unlock better outcomes to help buyers make the most of their digital transformation journeys.

The challenge of legacy procurement mindsets

It’s understandable why procurement works this way. In many industries, technology decisions historically mirrored construction or consulting contracts: define the scope, estimate the hours, agree on a margin, and deliver against a statement of work.

When applied to standard software products, it creates unnecessary complexity:

• Detailed scoping for something that already exists.
• RFPs that assume a custom build rather than proven capability.
• Evaluation based on cost inputs instead of delivered outcomes.

This service-style procurement doesn’t align with how modern software products are created, delivered, and priced. For product companies, this isn’t just a matter of preference. These processes are designed for a service business, not for platforms built for scale. The difference comes down to unit economics in software procurement.

Understanding software unit economics

• Service model = one organization funds most of the work (time and materials). The economics are linear: more customization requires more people, more time, and more cost.
• Product model = costs are spread across many customers. Subscription fees fund R&D and ongoing innovation. The economics are scalable: each new customer strengthens the product’s sustainability without proportional cost increases.

For buyers, the product model offers clear advantages:

• Lower upfront risk.
• Predictable expenditure (OPEX, not unpredictable CAPEX).
• Faster implementation.
• Access to collective innovation.

But here’s the key: when buyers force product companies into legacy procurement processes it erodes the product company’s margins. Long custom scoping exercises, RFP responses written as if for bespoke builds, and drawn-out negotiations all chip away at the vendor’s margins.

Those margins are what fund innovation, security, and long-term value that benefits every customer. If a product business is consumed by processes that assume a service contract, the result is either higher prices to cover inefficiency, or less investment available for product improvement.

In other words: outdated procurement practices can reduce the very value buyers are hoping to access.

Why this shift matters for your organization

Moving away from bespoke builds isn’t just about cost. It’s about resilience and agility.

Custom applications may feel like a perfect fit at launch, but they age quickly. They’re expensive to maintain, difficult to upgrade, and often leave organizations locked into niche skill sets, outdated infrastructure or additional vendors.

By contrast, standard platforms offer:

• Resilience — regular security patches, performance updates, and a roadmap shared across many organizations.
  Interoperability — integration with other best-in-class tools.
• Future-proofing — a development pipeline that reflects not just one organization’s needs, but the collective priorities of a sector.

In short, productized solutions align better with the pace of change.

Practical guidance for transforming procurement

Shifting procurement practices is part of a broader digital transformation journey. It’s not about rejecting the past, but recognizing what the future demands: speed, agility, and continuous innovation.

To get the most out of software products:

• Ask “What outcomes does this product already deliver?” instead of “What will you build for us?”
• Evaluate vendors on roadmap and scalability, not labour inputs.
• Consider total cost of ownership, not just upfront spend.
• Align with product companies on integration and innovation, not just scoping.

Organizations that adapt their procurement models unlock more than cost savings. They gain resilience, scalability, and the ability to thrive in an environment where technology evolves. The transformation isn’t only about technology. It’s about the mindset shift that allows you to fully realize the value of modern software products.

At Pladia, we’re here for the long-haul with a future-focused roadmap to support evolving customer needs and their audiences. That’s why we have a publicly available roadmap.