Organizations are ratcheting up how much they’re spending on cloud-based software—SaaS in particular—while cutting on-premises software. It’s likely that SaaS solutions already represent a rapidly growing part of your enterprise application portfolio.
Do you have a handle on the SaaS apps your organization is using? Do you know how many you have, how frequently they’re being used and by whom? If you don’t have this level of visibility—most companies don’t—you’re probably paying more than you should for SaaS subscriptions.
Large SaaS vendors use clever strategies to steer contract negotiation in their favor. In the recent webinar Control SaaS IT Spend with Effective Contract Negotiation, Dan Kelly, co-founder and senior partner of The Negotiator Guru, joined Flexera to discuss the issue. Kelly reveals the tactics vendors use to run up the total value of the initial contract as high as possible. He also sheds light on how they keep your costs climbing each time you renew by shooting for a bump of five to 15 percent each year.
The guru’s key takeaways
Kelly’s main points provide valuable insights you can turn into action to strengthen your bargaining position. Here are a few takeaways you need to keep in mind:
- Prepare well in advance of renewal. Preparation is 80 percent of negotiation. Start planning six months ahead of time so you aren’t caught off guard and under pressure to accept a deal that favors the vendor. Come prepared with the right information, such as how many licenses you have and how many are in use, so that you sit at the negotiating table backed by accurate data.
- Develop a negotiation plan with clear roles and responsibilities. A vital part of the vendor strategy is to divide and conquer by having its salespeople talk independently to many stakeholders in your organization. Their goal is to influence decisions and budgets and to put pressure on your negotiating team. To counteract this strategy, involve all your stakeholders in the negotiation plan and establish responsibilities.
- Rightsize to avoid overbuying license quantities or features. Know not only how many licenses you need but also how many of each license level. Some employees need the full feature set in the professional or premier license. Many others can do what they need with the more economical standard license.
- Research what other companies are paying. Vendors keep their cards close to the vest when it comes to pricing. Research can help you get an idea of what companies similar to yours in size, industry and overall software spend are paying.
- Leverage the vendor’s game to capture the highest value for your organization. Have confidence in your preparation. Don’t accept a vendor’s first offer. Expect to receive at least four offers before the vendor presents quantities and pricing that align with your expectations and needs.
- Maintain a forward-looking roadmap. Stay ahead of the game with a 3- to 5-year roadmap that accurately forecasts what you’re likely to need for subsequent contract years.
Flexera gives you bargaining power
Preparation is the key takeaway. It helps to gain visibility into your technology assets, so you go into the negotiation process with hard data. It’s important to note that these strategies are similar to the ones we use for on-premises software and apply to SaaS, too. Flexera can help you excel with those strategies.
Our solutions automate your technology asset inventory process and enrich the resulting information with more data. For example, Flexera includes discovery and identification capabilities that search your entire IT environment and discover more than 32,000 different SaaS applications. Flexera keeps its solutions up to date with detailed information on more than 6,500 SaaS applications and license details. Plus, the solution integrates with systems that contain info on SaaS app spending, usage and user identities.
With Flexera, you’ll get an accurate count of all the SaaS apps in the organization, including shadow SaaS. And you’ll know details about who’s using those apps, how frequently and what features they’re using. That information helps you:
- Rightsize in terms of license quantities and license type
- Present stakeholders with details on the SaaS apps they own, how they use them and how you plan to use that data to negotiate better contract terms as part of your negotiating plan
- Develop your roadmap based on current needs and expected growth
- Get the best deal possible before signing on the dotted line
Check out the webinar Control SaaS IT Spend with Effective Contract Negotiation for more details on getting the upper hand during contract negotiations.