According to the Global Software as Service (SaaS) Market 2021-2025 report, the SaaS market is poised to grow by nearly $100 billion between 2021 and 2025.
The more internal services, tools, and software that companies take on, the more they will need robust procurement strategies to implement their solutions in a strategic, timely, and cost-effective manner.
Below we’ll get into one of the most important steps of the procurement process: procurement contract negotiation.
The importance of negotiation in SaaS procurement
Procurement negotiation strategies are important if you want to get the best deals, save costs, and optimize your tech stack to the best quality. The more fair and reasonable your SaaS contract is, the greater return on investment you will see in your technology.
You will see the advantages of strategic negotiation in procurement when you’re signing cost-effective deals, your teams are using all of the tools they need, and your stack isn’t filled with obsolete or unused solutions.
What stats say about software procurement
SaaS procurement is all about buying the right tools at the right time for the right prices. It’s one of the most effective ways to keep expenses low and get the highest ROI on your technologies.
But what do the stats stay about SaaS procurement and the future of SaaS?
- A recent P&S study has recently projected the value of cloud-based Supply Chain Management solutions to exceed $11 billion by 2023.
- Gartner found that IT teams may be running operations with at least 25 percent of their software going unused.
- 1E released a report that found as much as 38 percent of enterprise software going to waste.
- 71 percent of workers said that the number of apps available to them makes work more complex.
- Nearly 50 percent of teams said that they spend too much time manually managing their SaaS apps.
With continued growth in the SaaS market, you and your team can expect the various solutions in your stack to become more convoluted for workers to sift through, which is why automated procurement and SaaS management is so important.
Proven procurement negotiation strategies
The importance of procurement negotiations can’t be overlooked in your procurement strategy. Within the negotiation stage, there are seven phases for success.
Below we’ll look at the major phases of procurement negotiation approaches in procurement, and some key procurement negotiation skills, tips, and tactics.
Phases of negotiating contracts with vendors
The seven phases of negotiating contracts with any vendor include planning, initiation, questions, proposal, negotiation, review, and closing.
Planning and preparation
This phase is all about understanding what your current needs and goals are. In the planning and preparation phase, you would evaluate:
- Your company budget
- SaaS needs as it relates to the particular vendor/technology in question
- Goals, KPIs, and benchmarks, as they relate to the SaaS solutions you plan on taking on
- The vendor’s history and reliability in the industry
- Your deal breakers. What aspect of the contract or technology is a must have or must avoid?
As a SaaS buyer, you want to set the tone and be clear about your team goals and expectations with your supplier/vendor. If there’s a mismatch on your goals against the providers, then you’ll know right away that there isn’t much of a point continuing the negotiation.
If you get through your list of internal demands and your supplier is on the same page, you’re ready to move to the evaluation phase.
After you’ve established your company needs, you want to make sure you understand what the supplier expects out of your contract. In fact, this stage is the bulk of the back-and-forth in terms of learning what is most important for your vendor.
The key here is to ask as many questions as possible, which will enable you to leverage the supplier’s response to get the most out of your negotiation process.
Draft a proposal
This is where you create your concrete proposal: what you want, at what capacity, for how long, and for what price. You should include contingencies at this point, like a pre-purchase test and possibilities of rescinding the contract.
While every step is an important part of the negotiation process, this step is about directly negotiating and bargaining an agreement with your supplier. You definitely do not want to rush into this stage. Often what ends up happening is that you might have an urgent need for a solution and agree to the first offer/contract you get.
Negotiation is all about back-and-forth compromises, and with patience and persistence, you can guarantee the most reasonable contract for your organization.
Leverage everything you’ve learned in the previous stages as well as other offers or contracts you might be considering to get the most out of the bargaining phase.
Review your contract
Once you’ve come to an agreement with your existing supplier, you want to review the contract. Look for any hidden cost or information that might seem off. For example, you might get tiered pricing that supports up to 50 users. If you know you need to support more than 50 users, that’s a problem that you need to bring up.
Pricing tiers, expiration contingencies, renewal points, and regional/international limitations are all things you want to look out for in the review process.
Close the deal
Congratulations, you’ve officially become a SaaS buyer and successfully negotiated your purchasing agreement. By following every step in the process, not rushing the negotiation, and properly evaluating your vendor relationships, you can be confident in signing the contract.
Modern procurement negotiation tactics
The challenges surrounding SaaS in the modern era has primarily to do with expansion. The number of partnerships with different parties, clients, suppliers, and vendors, overlap in technologies, excessive shadow ITs, excessive SaaS waste, a lack of data, and a general lack of understanding surrounding contracts has made SaaS procurement extremely convoluted and complex for most companies.
This is why having a SaaS procurement solution in your corner, like Sastrify, can be so valuable for ultimate success. With Sastrify you can leverage three important tactics to help simplify the negotiation process: Automated procurement, SaaS forecast, and seamless negotiations.
Sastrify allows you to put your SaaS procurement on autopilot. Our team will onboard your solution landscape through an all-in-one, spreadsheet free platform. Automated SaaS management gives you an overview of your solution usage, SaaS spend, security risks, waste, and other valuable data. You could come to the negotiation table more equipped by knowing exactly what your SaaS landscape looks like and what your needs are.
Procurement solutions can also compare SaaS usage and activity to your purchased licenses. Procurement technologies help you clean stack, reduce waste, and accurately forecast SaaS spend. You’ll also be notified upcoming renewals, expirations, or re-negotiation opportunities to maximize future savings.
Modern SaaS management teams will take care of negotiations so you don’t have to. Procurement solutions come with all the data, pricing, forecasts, and data to put you in position for success at every point. You still have visibility of the entire SaaS and negotiation process, and you could decide with technologies you want your procurement team to pursue.
The need for procurement negotiation tools
With SaaS set to expand and become more of a need across major industries, it’s important to have an advanced long-term strategy for procurement negotiations.
Sastrify can simplify the tedious process that is procurement and negotiation by automating SaaS spend and SaaS management, providing you with valuable insights, cleaning your tech stack, and handling negotiations for you.
Ready for your next SaaS purchase? Our team is here to handhold you throughout the negotiation process. Click here to learn more about how Sastrify can help your company get the most value out of SaaS negotiations and agreements today.