SaaS Pricing & Negotiation
The Cloud Challenge
The benefits of SaaS are real, but they are diminished by contractual lock-in. SaaS vendors today use agreement language to limit customer flexibility and guarantee future revenue increases. As a result, many customers find themselves entrenched with their SaaS vendors as they gain a reliance on their hosted solution.
Unlike software sales based on perpetual licenses for on-premise data centers, SaaS sales call for long-term commitments, recurring costs, and hosted solutions. It’s likely that you will encounter a SaaS engagement in the near future, either being pushed by your organization’s business units or by incentivized sales reps pressuring a shift to the cloud to capitalize on SaaS compensation bonuses.
The Truth About SaaS Pricing
The restrictions inherent in term-based agreements and the lock-in that comes from an organizational commitment to a vendor’s platform leave buyers with little leverage. The result: vendor sales teams dictate the demand model, pricing, and all contract terms and conditions. In other words, the seller controls all the negotiation power, while the buyer holds all the cost and risk.
The good news: SaaS quotes are not set in stone. You can negotiate SaaS pricing and contract terms to make them lean in your favor. There are nine key elements deal leaders need to gain proficiency in to drive deal success. These nine areas are emphasized in ClearEdge's negotiation framework, the Leverage Management Maturity Model (LM3):
Early Warning System
Risk Assessment & Inspection
Forecast & Modeling
Deal Timeline Development
Deal Option Development
Do we have an organized approach to starting deals on time?
Do we understand all SaaS contract and business risks?
How much SaaS product do we need, and when do we need it?
Have we documented a calendar of SaaS deal-making activities?
How might SaaS pricing strategy and motivations affect my deal?
What SaaS deal alternatives or "Plan Bs" do we have?
What information will we protect, and what will we share?
Are executives informed, aligned and participating on the deal?
Are we controlling the story with credible and consistent messages?
Mitigate Risk & Reduce SaaS Cost
When hampered by limited resources and a lack of time to plan, companies can fail to carry out effective buying campaigns against SaaS. ClearEdge offers clients direct, hands-on leadership throughout their deal cycle to build leverage, achieve organization alignment, and control SaaS cost in all major IT categories.
Our SaaS services augment client IT procurement organizations and help professionals create stronger, more productive SaaS relationships. Transaction services have the option to provide direction in deal set-up, team alignment, communication, and strategy, supported by real-time market intelligence and deal analysis.
SaaS Cost Approach
ClearEdge’s SaaS services are designed to be light touch and high impact. Instead of disrupting your team, we will augment it, providing the acumen, data, and advice needed to execute your most strategic IT engagements.
Consolidate SaaS license usage data
Aggregate key SaaS contracts for review
Risk & Inspection
Identify key SaaS pricing and contractual risks in agreements
Build financial demand models to optimize SaaS costs
Develop SaaS deal alternatives
Analyze SaaS deal options in multi-year financial models
Align stakeholders on SaaS deal objectives
Outline SaaS negotiation strengths and weaknesses
Create deal plan and strategic messaging
Execute SaaS deal strategy
Iterate models through rounds of SaaS negotiation
WANT TO LEARN MORE?
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Need Our Assistance?
If you need assistance with a SaaS licensing purchase or renewal, contact us today.