Software as a Service (SaaS) has become crucial to the running of many modern businesses but as inflation has taken hold, the costs of these products have become eye-wateringly expensive. As per research undertaken by SaaS purchasing experts Vertice: “The annual increase in SaaS spending has hovered around 11% to 16% over the past five years. This growth has far outpaced the rate of general economic inflation, even in recent periods of an uncharacteristically high CPI.”
The company cites auto-renewal clauses, clauses allowing any-time price rises, and a widespread lack of pricing transparency as just a few ways SaaS companies have been able to push their prices up so significantly. But in a high inflation environment, this isn’t exclusive to SaaS. How can businesses continue to rely on the technology they need to thrive when rising costs mean they are stretched elsewhere too?
Here are three ways you can manage and bring down your SaaS costs.
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1. Negotiate new contracts
If a contract renewal is approaching, this is the perfect time to negotiate a new deal. “To retain your business as a customer, providers are often willing to offer competitive rates or more flexible contract terms — but only if you drive a bargain in your negotiations,” Vertice explains. This means you need to know the SaaS market inside out and feel comfortable using this knowledge to bring the price down.
Find out what their competitors charge and see if you can use this as leverage (a company will probably be more flexible if they know you’re thinking about taking your business elsewhere). As well as the cost, you might want to consider negotiating other aspects of the contract, such as the contract term, the number of licenses, and the conditions around auto-renewals. Harvard Business School’s free report on Business Negotiation Strategies may offer some useful techniques.
Although you want to get the price down as much as possible, you still need the product to be suitable for your business needs. Don’t agree to changes in exchange for a discount if the software will provide less value for money in the long term. It may be worth hiring professionals with experience in this field to negotiate on your behalf.
2. Cancel unused subscriptions
It’s easy to forget about unused subscriptions — it’s estimated that American households waste $133 a month on them. And the same goes for businesses, particularly those with large tech stacks. In these cases, it’s very likely that certain applications go unused. That could be for a number of reasons. For example, employees don’t realize they exist, don’t feel confident using them, or they serve similar functions to other SaaS platforms.
The first step is gaining an overview of your software stack with the help of your IT team and employees across the business. You need to know exactly what you’re paying for, who is using them and how, and whether they are providing value for money when you factor in subscription costs. This will hopefully help you identify which programs you can terminate, and perhaps also highlight ones that could prove useful with increased employee awareness or further training.
3. Standardize your procurement processes
Making sure all parties are on the same page when it comes to SaaS procurement will help to ensure that you’re securing the right tools for suitable prices and minimizing wasted spend. A standardized process will also make SaaS procurement more seamless and save time.
You’ll find it easier to evaluate and compare future proposals from vendors and can use your business’s established standards to determine the quality and cost-effectiveness of each option. A standardized procurement process also establishes consistency to help you build a tech stack full of complementary platforms that will increase employee uptake and reduce the likelihood of applications going unused.