saas
June 1, 2021

SaaS buying is broken

Don't buy SaaS the same way you buy other things online. Because unlike your favorite pair of sneakers that you bought online last Christmas and haven't used it since, there are more nuances when it comes to procuring SaaS. So what is the best way to buy SaaS? Let's figure it out through the eyes of our imaginary friend, Mark.

SaaS buying is broken

Meet Mark, he manages finance for a highly successful company. They’ve grown 5x in employee size and 100% in revenues since last year. They had earlier stuck to traditional ways of working but have since gone completely remote. Mark now has a problem, his team has been sending him expense reports and it was consuming a lot of time to handle each one of them separately. Hence Mark decided to implement an Expense Management tool in his company.

He starts to scour the internet for options - and soon realizes that there are ten of them. Some of them he had seen earlier in a long lost Linkedin ad, and others were boasting great reviews (of course they have great reviews, the vendors write most of it themselves). He then researches them one by one, looks at product walkthroughs and is amazed by their fancy features (wow, this one offers an API! But will Mark’s team actually use it?). He finally shortlists the top three tools entirely based on biased reviews and the vendor’s marketing budget and compares them side by side. He quickly realizes that it's not very useful (what does *insert any industry jargon* even mean?). He’s exhausted looking at different options and finally decides to go with whatever is the cheapest. ERROR 404: Price not available. Contact Sales.

Mark waits for a day for the salesperson to respond, and guess what, they don’t even show him the product immediately. The ‘discovery’ call is important. After three days, he finally gets a demo. And then a quote.

“Oof. That seems expensive. Is this how much it is supposed to cost?” he mumbles to himself. Then the most proactive salesperson of the three vendors calls Mark and strikes the killer blow: “Your competitor is using us and they’ve saved 5 hours a week! Pay now to stay relevant”. For a second, Mark thinks about what can go wrong. My competitor is also using the tool. He has made up his mind now. It’s time to buy.

He haggles with the salesperson, who says that the prices are standard. But Mark stands his ground. He believes he’s entitled to a lower price. The salesperson calls back in an hour, with a HUGE 10% discount. Mark is overjoyed. He sends it to his CEO for approval who assumes that Mark has done the due diligence and signs off on it without batting an eye. Mark then sends the invoice to his internal team for payment, billing (a.k.a the boring stuff). His already overwhelmed finance team has to deal with 122 different tools. Things are all over the place and they are barely able to coordinate things in an entirely remote company. Mark however, closes the deal, signs the “boilerplate” contract and does not notice that the contract has an auto-renewal clause with a thirty day notice.

Now let’s review the process again, shall we?

Selection:

Whenever you have a need, the best and the fastest way to select a tool is to consult a peer who has used the tool you seek. Not only does this help you cut through the BS you find online, but also provides a benchmark for what the industry is using. You can also find out the top tools used in each category on websites like Datanyze. Certain reviews from LinkedIn, comments from genuine profiles on twitter and posts on reddit/forums can offer you the much needed social proof to save you from decision fatigue.

If you want to quickly experience a product, there is a very good chance that you might be able to find a walkthrough on youtube. Most companies would have uploaded webinars or demos onto their main channel or linked them to specific use cases on their website.

Also, make sure that you check internally if your company has been using a similar product. This usually happens with tools having multiple use cases (think CRM, productivity & management tools). Duplicate tools account for a good 10% of SaaS waste in high growth companies.

Pricing:

Never pay sticker price for a SaaS tool. Even if you think that the license count is small, contact the vendor’s sales team anyway. Make sure you look for resellers or distributors as well as they’ll be able to provide you with a significant discount from the initial price (even close to 40-50% in some cases).

Negotiating:

Always benchmark the vendor’s price before negotiating. We’ll be honest here, it is not a very easy thing to do by yourself. We’ve built up a pricing database of 1000+ tools and it took us years to do that. Try your best to inquire about pricing from your contacts, but if not, here’s a tip from our experience: there’s always a possibility to reduce upto 30% from the initial quote provided by the vendor.

Approvals:

Make sure you have a robust approval process that makes sure only the tools that you need are actually bought. A lot of tools might seem to offer great value to other companies but it might not be a fit for you. We recommend that you run the contract through your legal and finance teams as well before signing.

Management:

Do not let each department manage their own SaaS tools. Organizing your company’s entire SaaS stack at one place can makes a significant difference. You can start off with a centralized spreadsheet and implement SaaS management tools once your SaaS stack grows beyond 200+ tools (or $3M in spend). Some tools can help you check for real time adoption rates and license utilization as well. The bigger challenge when it comes to management is to make sure that duplicate software is not procured and unused software is churned before renewal. We recommend you to review all your SaaS tools at least once a month and obtain feedback about usage from your employees on a regular basis.

Renewal:

DO NOT AUTO-RENEW SAAS! If there is one thing that we want you to take away from this blog is this.  SaaS renewals on Autopilot cann leave you stuck with a long term contract you might not need and robs you of the opportunity to right size and renegotiate the contract depending on your needs. The best practice is to review all your SaaS tools 120 days prior to the expiry date. Always renegotiate the tools depending on the right number of licenses required.

Adithiya Namasivayam
Spendflo makes your entire SaaS buying cycle faster, cheaper and more efficient. And if we can’t? We’ll write you a check for the difference.

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