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Many SaaS providers still use pricing models that severely limit the flexibility of their customers. Below are a few simple tips to help negotiate better terms from SaaS software vendors.
There is no longer a need to sign multi-year contracts. A true cloud solution provider should allow its customers to leave when they are no longer satisfied.
SaaS vendors typically require a multi-year agreement to ensure that the customer does not walk away if they realize that the solution is not quite as awesome as it looked during the demos, or if the implementation continues to drag on well beyond the promised three-month time frame.
Customers may also ask for a multi-year contract because they want to lock in a higher discount for as long as possible. But prices for computing resources are falling over time. Vendors can claim that they continue to add features that make their software service more valuable, but this should be offset by the reduced infrastructure costs and the economies of scale that come with an increasing number of customers that use the service. So, ask the vendor for a long-term pricing commitment and reserve the right to stop using (and paying) for the service if your organization is no longer satisfied with it. If the vendor is confident about the service it provides, this should not be a showstopper for them.
Avoid paying for licenses until go-live. A true cloud solution provider should not need to charge for usage until the customer’s employees are using it.
Despite the fact that it should be easy to set up an environment for a new customer in the cloud, and during tool selection the vendor may assure the customer that the implementation will take only a few months, most enterprise SaaS implementations can still take many months to complete. To test whether the SaaS vendor is confident about the time it will take to deploy its software service, it is important to ask the vendor not to charge for usage of the service until it is actually up and running. Also, be sure to ask for a fixed-price implementation offer.
Make sure that your costs go down when your organization is temporarily downsizing. A true cloud solution provider should allow its customers to scale down as well as up.
When an organization increases its use of a SaaS solution, it is often relatively easy to order additional licenses. Before signing an enterprise SaaS agreement, be sure to ask how the vendor handles a reduction in the number of licenses. In many cases you will find that it is very difficult to scale down. This should cause buyers to question whether they are dealing with a vendor that knows what it is doing. Modern cloud architectures make it easy for SaaS providers to scale up the capacity they need for their customers and just as easy to scale down. If they are making use of these modern technologies, the costs for the vendor should go down when a customer scales back. They should pass these savings on to the customer.
Avoid vendors that still require their customers to perform periodic upgrades. A true cloud solution should improve gradually, and the provider should be responsible for testing each release before it is deployed for its customers.
Vendors that only provide upgrades two or three times per year are still working in a traditional development cycle. This puts a large burden on their customers, even when these customers skip releases to ensure that they only need to upgrade once a year. To perform an upgrade, a customer typically needs to download the new release, install it on their (cloud-based) test environment, test it, correct all the customizations that now fail, test it again, prepare their users for all the changes and then perform the upgrade in their production environment. This process can easily take six weeks to complete. Those six weeks represent a significant cost and are an unnecessary distraction.
A modern SaaS provider takes the responsibility for testing away from its customers. It is the provider that must ensure that a new version does not cause any issues. The vendor should know how its customers use the product and should have automated test scenarios in place to identify issues before a new release is made available. By releasing much more frequently, the vendor takes its customers on a journey that very gradually but continuously improves the service. This more agile approach also ensures that the vendor is able to provide bug fixes far more quickly and resolve potential security vulnerabilities without requiring their customers to waste any time installing patches.
Even after a multi-year SaaS agreement has been signed, it is not too late. In fact, it is important to keep an eye on the renewal date. It often requires about a year for an organization to select a replacement for one of its current SaaS solutions, so SaaS vendors have a lot of leverage when it is time to renew. They know that they can dictate the terms of a renewal if the customer did not reach out soon enough to have a strong negotiating position.
As soon as a vendor believes that it has locked-in a customer, this customer will be looking at a significant price increase upon renewal.
At 4me, we want to put an end to the practices that have prevented SaaS from delivering the cost savings and flexibility that it should naturally provide. These tips may help. For organizations that currently use a cloud-based IT Service Management (ITSM) solution, we can do more than just provide a few tips. If your organization is looking to renew, let us know. Once we know the scope of your deployment and its integration points, we can provide you with a quote for a fixed-price replacement and a running cost that is typically 50% to 75% lower than that of the current solution. This quote should give you a much stronger negotiating position. Our competitors know how quickly 4me can be implemented and they also know that if an enterprise organization starts to compare their solutions with 4me in great detail, the enterprise will select 4me.
