SaaS Vendor Negotiation - The Do's and Don'ts

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min read time
March 8, 2023
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What is the one fear that every procurement team has? Well if you’re thinking poor SaaS negotiation abilities, you might be onto something. 

Many companies realize the need for a procurement team when they have taken a hit on SaaS negotiations in the past which would have already resulted in poor vendor relations. 

Your entire SaaS spending depends on how you negotiate your SaaS contracts and that in-turn helps establish a dialogue between you and the vendor resulting in better Vendor relations.

Here are some do’s and don’ts that we can suggest from years of experience dealing with SaaS vendor negotiations.

Why are SaaS vendor negotiations necessary for businesses?

Businesses must emphasize vendor negotiations in today's inflation-prone market. Vendor negotiation strategy encompasses communicating and reaching a deal with a third-party vendor who delivers products or applications to the buyers.

One of the key advantages of vendor negotiations is cost reduction. Businesses can receive better rates on products and services by haggling with vendors, leading to substantial cost savings over time.

For instance, negotiating lower or usage-based pricing for software-as-a-service (SaaS) subscriptions can help firms save significantly in the long run.

Better quality products

Another advantage of vendor negotiations is the chance to improve service quality. Negotiations can assist organizations in ensuring that vendors satisfy their needs and comply with industry standards, resulting in improved service quality and customer satisfaction.

Negotiating service level agreements (SLAs), for example, can assist businesses in ensuring that providers satisfy their performance goals and deliver reliable services.

The best practice

Vendor negotiation strategy necessitates meticulous strategy and execution. To avoid surprise price or policy changes later, it is critical to fully understand your business needs, investigate your vendors and their credibility, negotiate service level agreements, and ask the required questions.

At the same time, avoiding typical pitfalls such as hurrying the discussions, accepting the original offer or list price, neglecting hidden costs, and overlooking future requirements is critical.

Keep scrolling as we’ll discuss the SaaS vendor negotiation best practices.

The Do's And Don'ts Of Saas Vendor Negotiations

Negotiating with SaaS vendors can be a complex process that requires careful planning and execution. Following certain dos and don'ts is essential to ensure that your business gets the best possible outcome in vendor negotiations. So, here you go;

1. Do: Have a clear understanding of your requirements

Before negotiating with a vendor, you should communicate with your team and clearly understand your requirements.

Identifying whether your team’s requirements are nice-to-haves or must-haves is essential. The needs may be linked to the budget, specifications, features specific to the business, etc. Understanding your requirements will help you negotiate more effectively and ensure you get the needed services.

2. Don't: Rush the negotiations.

Many businesses make the mistake of rushing through negotiations. Negotiations require time, and investing time in researching vendors, preparing proposals, and effectively negotiating is critical.

Rushed negotiations can result in bad outcomes and missed possibilities for cost savings or enhanced service quality.

3. Do: Research your vendors and their capabilities

Detailed research on vendors is necessary to ace SaaS negotiations. Analyze your vendors, pricing models, and reputation; check their sites, customer feedback, and industry reports. This information will assist you in more effectively negotiating and making informed decisions about which vendor to choose.

4. Don't: Accept the initial offer or list price.

Vendors often make an initial proposal or list price that must not be accepted without further negotiation. Their initial pricing might look attractive, but there will always be a trap behind it. So, do not accept their initial offer; communicate with your team and stakeholders and start negotiating.

Price negotiations will result in cost savings and improved value for your company. Negotiate for rebates, flexible terms of payment, or additional features to guarantee you get the best price possible.

5. Do: Negotiate the service level agreements

SLAs (service level agreements) are integral to SaaS vendor negotiations. SLAs define both parties' expectations and duties and can help guarantee that the vendor follows through on their promises. Negotiating SLAs is essential for ensuring you receive the required service and quality.

SLAs will include crucial liability clauses; pay close attention to those clauses, and ask the right questions before signing the contract.

6. Don't: Compromise security and compliance

When negotiating with vendors, security, and compliance are essential factors. You should check that the vendor fulfills your security and compliance needs and does not jeopardize the data or information of your enterprise.

To guarantee that your business is safeguarded, it is critical to negotiate for secure systems and compliance measures.

There are various compliance standards for SaaS vendors,

  • SOC 2
  • GDPR

Ensure the applications have passed the security and compliance audits during SaaS buying negotiations.

7. Do: Ask the right questions

Asking the correct questions is essential for successful negotiations. By asking the appropriate questions, you can negotiate more successfully and make better-informed choices. To guarantee that you have a thorough knowledge of what the vendor offers, you should inquire about pricing, features, customization choices, security measures, and customer support.

8. Don't: Overlook hidden costs

In vendor negotiations, hidden costs are a common issue. These could include setup fees, maintenance expenses, or extra charges for specific features. To minimize disappointments later, it's critical to ask about these charges upfront and negotiate for fair pricing.

9. Do: Ask for discounts

When negotiating with SaaS vendors, consider that rates are usually negotiable. Don't hesitate to ask for concessions or other incentives, like extended payment periods or free extra services.

It is recommended to choose long-term contracts, as vendors will be more open to offering discounts for long-term commitments.

10. Don’t: Ignore your future needs

When negotiating with a SaaS vendor, it's essential to think about both your current and future demands. Consider your expected growth path, future changes to your business model, and upcoming technology that may impact your requirements.

11. Do: Have a plan B

Even if you seal the best possible deal with the vendor, there is always the possibility that things will not progress as planned. That is why having a backup plan is essential. Consider alternate vendors, backup solutions, or other measures that might help manage risk while avoiding business disruptions if your SaaS vendor negotiation strategy fails.

12. Don’t: Sign the agreement without involving your teams and stakeholders

Finally, while negotiating with a SaaS vendor, including all key teams and stakeholders is critical. This covers legal, IT, finance, procurement, and any other departments the vendor relationship may affect.

By including all parties concerned, you can ensure that everyone's demands are met and that the final contract is comprehensive and reasonable.

SaaS buying negotiations are an ever-growing strategy; click here for a detailed view of how to negotiate with SaaS vendors effectively.

CloudEagle simplifies SaaS vendor negotiations

CloudEagle is a SaaS management platform equipped with SaaS vendor management features and expert negotiation services.

Vendor Research: CloudEagle's vendor research feature gives businesses comprehensive data on prospective SaaS vendors, such as their capabilities, pricing, and customer reviews. This can assist organizations in making more informed choices when choosing a vendor to negotiate with.

 An image of vendor dashboard

Manage SaaS vendors: CloudEagle's SaaS vendor management feature provides enterprises a single dashboard for managing their relationships with SaaS vendors. This involves keeping track of contracts, service level agreements, and other essential information.

Assisted SaaS buying experts: CloudEagle's assisted SaaS buying experts can negotiate with vendors on businesses' behalf, leveraging their skills and experience to get the best possible deals. This can save enterprises time and money while guaranteeing them the best terms.

Contract management: CloudEagle's contract management feature gives enterprises a consolidated platform for managing their SaaS vendor contracts. This involves keeping track of contract terms, renewal dates, and other pertinent information.

An image of contract dashboard by CloudEagle

Pre-negotiated discounts: CloudEagle has built wonderful relationships with popular vendors over the years, which has given us access to unique vendor discounts to help procurement teams and negotiators save on SaaS spend.

Overall, CloudEagle can assist organizations in streamlining their vendor negotiation process by offering the tools and expertise required to make intelligent decisions, negotiate advantageous terms, and successfully manage vendor relationships.

Frequently Asked Questions

1. How can vendor negotiations help my business?

Vendor negotiation can assist your business by lowering expenses, boosting service levels, and ensuring that vendors provide the most value for money.

2. How can I ensure the vendor charges me a fair price?

Certain vendor negotiation skills can ensure vendors charge a fair price. This includes researching the market and knowing the pricing methods similar vendors use. Also, if you discover the same product or service at a lower price elsewhere, you can negotiate for a reduction or request a price match.

3. What are some common mistakes to avoid while negotiating with a SaaS vendor?

Some common pitfalls to avoid during SaaS vendor negotiations include rushing the negotiations, accepting the first offer or list price, failing to consider hidden expenses, and ignoring future demands. To secure the most excellent deal for your business, you must take your time, conduct thorough research, and implement vendor negotiation skills to negotiate well.

Written by
Anju Mary Peter
SaaS Buyer, CloudEagle
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