The current state of business paints a worrying picture for SaaS buyers.
Our data shows that SaaS inflation is round four times higher than general market inflation. In particular, SaaS spending in the UK and Australia is currently growing five times faster than market inflation – and as much as 3.5 times more in the US.
These would be alarming numbers in any economy, but for CFOs trying to boost growth during an economic downturn, rising software costs should set alarm bells ringing.
One of the reasons why SaaS vendors can increase their prices year after year is that so many hide their pricing information. As a result, buyers lack the insight to negotiate best-in-class deals on their software contracts.
Without a frame of reference about what other companies pay, many get higher rates for enterprise-level software subscriptions. So much so that our data indicates that as many as 90% of companies are paying 20% to 30% too much for their SaaS products.
What can you do?
Supplier prices are rarely set in stone and buyers have more purchasing power than they realize as they approach negotiations and are equipped with leverage. When your company reaches out to sales teams to inquire about SaaS solutions, there is often room to negotiate the contract.
Finance and procurement teams should be aware of the negotiation tactics that can be used to get SaaS products at a better price and avoid the common pitfalls of software negotiation. If you want to reduce your software costs in 2023, these are the strategies recommended to secure SaaS contracts with long-term value.
If reducing SaaS costs is a top priority for your business in 2023, improving your software negotiation strategy is the place to start.
Give yourself plenty of time to prepare
The first step in gaining bargaining power is to give yourself time.
Be sure to approach a supplier to renew the contract or enter into an entirely new contract long before you plan to go on board with the new product. First of all, you need to understand your needs and research extensively which tools are best equipped to meet them.
To get you started, compile a short list of resources and consider:
- The number of licenses the company needs.
- The level of support and maintenance required.
- The features you deem essential and would be “nice to have”.
- The budget you are willing to spend.
This way you enter the negotiations with the knowledge and time you need to get the best deal. If you don’t take this time, your supplier may realize you need a quick turnaround and respond with rigid terms. While there is no one-size-fits-all solution, we generally recommend that the average company begin the procurement process six to eight months before contract renewal.
Take into account the length of your contract
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