Companies are spending more on software and IT than ever before - and for good reason. Software as a Service (SaaS) solutions can provide companies with access to the latest technologies quickly and supercharge their digital transformation and growth.
Cloud-based SaaS options offer unparalleled flexibility and scalability. However, with the myriad of options available in the market, the procurement process can often seem like a daunting task.
How do you ensure that you're selecting the right tool for your organization's unique needs? How do you balance cost considerations? How can you optimize your SaaS spending to ensure you're getting the most bang for your buck?
This guide aims to demystify the SaaS procurement landscape, providing you with a clear roadmap to navigate the complexities and make informed purchasing decisions.
Ready to navigate the world of SaaS procurement? Let’s dive in!
Table of Contents:
What is SaaS Procurement?
Procurement is often confused with SaaS purchasing. While these jobs are certainly similar, there are some key differences that affect how you approach them.
It involves carefully selecting, negotiating and purchasing the right SaaS tools for your organization. It’s not just a purchasing decision; it is a strategic process that involves evaluating your options and finding out which tools work best for your desired workflow.
Effective procurement strategies require a multi-department approach. How will SaaS tools work across teams? Will existing tools need to be replaced? If teams don’t want to switch, will new SaaS tools work with the old systems?
Let’s discuss the key steps needed to get SaaS procurement right.
The SaaS Procurement Process Uncovered
Step 1: Conduct a Needs Assessment
Before diving into the vast sea of SaaS options, it is crucial to clearly define what your organization needs from the new systems.
You should:
Conduct an honest audit of the current software stack, identifying its strengths and needs for improvement
Identifying the problems or challenges that the software will solve
Deciding on who needs what (i.e. which departments and teams need a SaaS overhaul most)
Setting a budget and understanding the total cost of ownership (TCO)
In some cases, organizations may opt for a "partial transformation," which involves using a finite budget to upgrade systems for some teams and departments, but not others.
This can be a useful way to stretch out the wallet, but this approach can lead to disparate systems, resulting in data and process silos. As some teams move to new SaaS solutions while others remain on legacy systems, integration between the two can become complex and cumbersome. This ultimately makes collaboration between departments challenging.
Step 2: Vendor Research and Evaluation
Once the needs are defined, the next step is to identify potential SaaS vendors and evaluate them based on various factors:
Comparing features and functionalities
Assessing pricing models and contract terms
Reviewing customer testimonials and third-party reviews
Evaluating the vendor’s reputation and financial stability
How can you do this? One way is to use software comparison sites like G2, ProductHunt or Capterra.
However, reviews can be inconsistent and may not match up with the needs of your organization. This is especially true for niche products and vertical SaaS tools, where real comparisons may be sparse.
These sites most likely won’t take into account your existing product stacks, either.
Instead, we recommend working with a SaaS advisor to explore your needs and identify the right solutions for your specific workflows. This process is known as a software audit.
Step 3: Contract Negotiation
Once you’ve found the right vendor, your focus should turn to negotiating the best deal possible. A common misconception is that a B2B SaaS product’s pricing page is final. In reality, there exist lots of opportunities for bringing those prices down.
Negotiating the terms of the contract, including pricing, service levels, and data ownership
Reviewing the contract with negotiation experts to ensure it aligns with the organization’s interests
Clarifying exit strategies and termination clauses
You should understand the product’s pricing model and take advantage of volume discounts, tiered pricing, and limited offers.
An important part of this process is being aware of hidden fees and additional costs. Look out for support fees, implementation costs and contract termination clauses.
This process can be tricky, and we recommend working with a SaaS negotiation partner to get the best deal for your business.
Read our full guide on SaaS contract negotiation here.
Step 4: Implementation & Integration
Once the contract is signed and the SaaS solution is officially procured, your next step is to integrate the software with your existing systems.
Here is a detailed breakdown of these steps:
Produce a robust implementation plan: To reduce operational downtime and avoid any errors or oversights, you should plan how you’re going to phase out the old system and implement the new SaaS product. It should set out the timeline for integration, whose responsible and cover how data will be migrated to the new system.
Test the new system: Before fully deploying the SaaS solution, conduct thorough testing to identify and resolve any issues. This helps avoid any headaches during the full-scale rollout.
Training and Onboarding: Prepare your staff for the transition by providing comprehensive training on how to use the new software effectively. It’s important to show employees how to use new systems to complete every task that the old system could do. We also recommend demonstrating any new features or capabilities.
Step 5: Performance Monitoring and Management
Ensuring that your SaaS solution continues to meet your organization's needs and delivers optimal value requires ongoing attention.
This is where performance monitoring and management come into play:
Regular Performance Reviews: Regularly monitor how well the SaaS solution is performing. We recommend using the metrics and criteria defined in the contract as a baseline (such as uptime, response time and load time as per the SLA).
User Feedback Collection: Actively collect and analyze feedback from the staff members who are using the software. Their insights are invaluable for understanding how the solution is impacting day-to-day operations.
Based on performance data and user feedback, you should make necessary adjustments to the configuration of the SaaS solution to optimize its effectiveness and efficiency.
Step 6: Renewal or Termination
As the contract period nears its end, a decision must be made about the future of the SaaS relationship: should you stick or should you twist?
Renewal Considerations:
Performance Assessment: Review the performance metrics and user feedback collected during the contract period. Has the SaaS solution met the organization’s needs and expectations? Has the product delivered a positive return on investment (ROI)?
Vendor Relationship: Evaluate the relationship with the vendor. Have they been responsive, supportive, and reliable?
Renewal Terms and Pricing: Review the terms under which the contract will renew. Will the pricing remain the same, or are there scheduled increases? Are the terms still favorable for your organization?
Of course, sometimes products become obsolete, and the only option may be to terminate the relationship and transition to a different solution. The procurement process then starts again, scoping out what needs are left unfulfilled and finding new technologies to fill those gaps.
Planning on terminating? Keep in mind:
Termination Costs: Be aware of any early termination fees or data retrieval costs.
Renewal Notification Period: Contracts often specify a period before the renewal date by which you must notify the vendor if you do not intend to renew. Be clear on this date and set reminders to avoid unintentional auto-renewal.
Termination Notice Requirements: Review the contract for the notice period required to terminate the agreement and ensure that your organization complies with this timeline.
Best Practices for an Effective SaaS Procurement
Now that we’ve covered the essential process for finding and implementing a new SaaS product, let’s discuss some key tips and best practices:
Involve Employees and Teams Early in the Process
Essentially, the people who know the most about what’s required from systems are the ones actually using them. The needs assessment must be driven by employee feedback and you should include all teams in this exploration process.
When end-users are involved in the selection process, they are more likely to feel a sense of ownership and buy-in. This can help mitigate resistance to change, as users feel their opinions are valued and considered.
Consider Integration Between Platforms
The most effective software stacks are those that integrate well with each other using data-sharing protocols and APIs. Integration can create a more seamless and user-friendly experience, as employees can move between platforms easily and with a consistent interface.
When compiling your software shortlist, look to see whether these options will integrate with your existing systems (or indeed, other identified SaaS options). Do they support common protocols like IFTTS or CRM integrations? What apps and plugins are available for these platforms
Approach Procurement with a SaaS Negotiation Partner
Procuring the right SaaS products can be difficult and time-consuming. Software audits take time and contract negotiations can drag on for months.
For organizations that lack time or expertise, a negotiation service can be invaluable. These leverage their expertise to find the right tools and negotiate favorable contract terms on your behalf.
Get SaaS Procurement Right with Smartcost.io
Looking to optimize your software budget? Smartcost.io is here to help. Our clients, on average, save 30% on SaaS purchases, renewals, existing contracts, and implementation fees.
Interested? Request a free Savings Analysis today to see how much you could be saving with Smartcost.io.
Comments