SaaS has revolutionized how companies deliver digital tools to employees, with the average company managing over 100 SaaS products across different business units each year. However, juggling multiple SaaS contracts can quickly lead to uncontrolled spending if not managed properly.
While SaaS simplifies the application and functionality of corporate tools, negotiating a SaaS contract with favorable pricing and terms can be complex. Your procurement team must collaborate closely with sales teams to secure the best outcomes for your business.
A SaaS contract involves the provision of packaged software that is remotely hosted and managed by a SaaS provider or vendor. This cloud-based model allows access to the software via the web from any location. Your data is stored in off-premise servers maintained by the SaaS provider, making data management, renewal, and procurement an ongoing task.
Common questions arise during SaaS agreements, such as the true market price, whether a monthly or annual subscription is better, how to manage renewals, and vendor management.
This guide will break down how to get the most out of your SaaS contract negotiations.
From customer data access and protection to service agreements and failure responses, every part of a SaaS contract is negotiable. SaaS vendors need your business more than you need them, especially for annual contracts. Use this leverage to negotiate discounts, redlined contract terms, and tiered pricing.
Negotiations are all about leverage, think of it like a game of tug of war - there has to be push and pull. If you ask for something, they will ask for something in return. At the end of the day you have the most valuable piece of leverage which is the ability to sign and become or remain a customer.
Time is one of the most important tools in your arsenal during any form of negotiation. If you have less time, the vendor has the ability to pressure you into getting a deal done. Initiate the negotiation process well before your current contract's renewal date. Early negotiations give you ample time to secure favourable terms and avoid rushed decisions.
Stay on-top of all of your high value renewals and begin the process from 3-6 months out for the best results at renewal.
Ever tried to get something you want from someone who doesn't like you? At the end of the day you're going to be negotiating with a very human sales team. Attending regular catch ups with your reps, events or offers hosted by the vendor like workshops or conferences are great opportunities to build trust and strengthen relationships.
Align your team's objectives to balance cost, value, and risk effectively. Develop clear requirement rankings for RFP vendor scoring criteria. Strategically time negotiations by researching vendor fiscal year-ends. Enhance leverage by identifying competitors, alternatives, and shelfware trade-in options. Understand vendor sales team incentives. Maintain preparedness with a walk-away "Plan B."
Nothing is more powerful than understanding the playbook the vendor you're evaluating is using. It's imperative to have an understanding of:
Our data shows that 80% of companies don't even negotiate on all of their top 15 highest spend vendors at renewal, so it's highly likely the other hundred or so vendors in your stack are slipping under the radar.
Recognising the right time to seek support for negotiating your SaaS contracts is essential. Every dollar saved can make a substantial impact on your operational expenses and overall profitability.
Engaging a software negotiations service like VendorSage can deliver the support you need and drive significant results. Our experts bring extensive experience in procurement and SaaS negotiation to the forefront. They take charge of your negotiations, working closely with internal stakeholders and directly engaging with providers. With access at the contractor level and streamlined processes, they ensure seamless collaboration internally and effective engagement with providers.
Negotiating SaaS contracts can be daunting for many buyers. It’s often difficult to know which aspects to prioritise, discuss, or disregard. Without experience in SaaS contract negotiation or a solid relationship with your vendor, the process can be fraught with risks and potential pitfalls. To mitigate these challenges, it’s essential to clearly understand your needs and possess the skills necessary to navigate the negotiation process effectively. Here are some important elements to be aware of during the negotiation process:
Conduct thorough benchmarking and market research to grasp industry-standard pricing, terms, and conditions. This knowledge empowers you to negotiate more effectively and secure competitive deals. For instance, when negotiating an email marketing SaaS, knowing the average cost per user in the industry strengthens your bargaining position.
Before entering negotiations, ensure you have a comprehensive understanding of your organization’s software needs. Identify essential features, user requirements, and scalability considerations to inform your strategy. For example, determine the number of users, necessary functionalities, and potential future growth when negotiating for a project management SaaS.
Factor in scalability and future growth during negotiations. Anticipate organizational expansion and negotiate terms that accommodate additional users, increased usage, or the adoption of extra software features without significant cost implications. For instance, discuss scalability in a project management SaaS concerning expanding project portfolios.
Pay close attention to SLAs. Define performance expectations, response times, and resolution procedures. Establish measurable metrics for assessing the vendor's commitment to delivering quality services. For instance, when negotiating a cloud storage SaaS, ensure that downtime allowances and data recovery protocols meet your business needs.
Maintain flexibility in negotiating terms that balance your organization’s needs with vendor conditions. Strive for terms that align with your long-term goals while fostering a collaborative relationship. Consider scalable pricing models based on usage or opt for shorter contract durations to allow for more frequent reassessments.
Prioritise discussions on data security and compliance. Ensure that vendors adhere to industry standards and regulations relevant to your organization. Clearly define data protection measures and compliance requirements. For example, when negotiating a healthcare SaaS contract, address HIPAA compliance and robust data security measures.
Engage legal experts to thoroughly review the contract. Ensure that all terms, conditions, and legal obligations align with your organization’s interests and comply with relevant laws and regulations.
Include clear exit and termination clauses that define the conditions for either party to end the agreement. Ensure transparency and mitigate risks amid changing business circumstances. For example, negotiate exit terms for a CRM SaaS, including data portability and transition support.
Address renewal terms and pricing structures upfront. Negotiate renewal rates, terms, and potential changes well in advance to avoid surprises and maintain control over future costs.
Vendor negotiation is essential for acquiring the right product at the best price. However, business owners and procurement leaders frequently report that their teams lack the time to negotiate effectively with vendors. This can result in higher costs, auto-renewals, and potential security risks.
Our team has extensive experience negotiating hundreds of millions of dollars in SaaS contracts, ensuring vendors agree to mutually beneficial terms. On average, we secure 1.5x more discounts for our customers than if they negotiated independently.
VendorSage's SaaS buying experts help businesses acquire the right amount of licenses within budget. They analyze your requirements and leverage price benchmarking data to ensure you get the right product at the best price.
Our on-demand negotiation experts provide insights into your usage, market trends, and competitive data. You can engage with them anytime and use their insights to negotiate directly with vendors.
Alternatively, you can leave the entire process to our team. We'll handle the negotiations, leverage benchmarks and discounts, and secure the optimal product at the best price. We've saved organizations over 1,000 hours in negotiations and realized millions in savings.
Have any questions about an upcoming renewal or purchase? Speak to one of our team today.
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