Purchasing software is not a static process. Software pricing is subjective and dynamic. As the software buyer, it’s crucial to approach the conversation with your sales rep armed with the right data, comparison points, and negotiation tactics to approach this discussion confidently.
We can help. Here are 6 tips you can use to ensure you’re getting the best price and moving toward a successful negotiation.
Cooperative bargaining: use the teamwork approach
Negotiations go more smoothly when buyers and sellers acknowledge setting the competition aside, and begin negotiation with a collaborative approach rather than fighting for the upper hand. Both the buyer and the seller have clear objectives during the software buying negotiation. Buyers want a fair deal that gets the functionality needed without breaking the budget. The sales rep wants to get buyers what they need without compromising the value of the product, brand, and their time.
The ability to see the situation as the other side sees it, is one of the most important skills a negotiator can possess. By treating the SaaS buying process as a partnership, purchasing negotiations become efficient and pleasant, ending in a stronger win-win relationship between the entire negotiation team.
State your software purchasing dealbreakers
Start the SaaS negotiation process by addressing the elephants in the room. Instead of avoiding discussion around the dealbreakers related to buying new software, lay them out upfront. By sharing the items that will end the negotiation with a sales rep, they are given an opportunity to understand, respond, and find solutions. Once these major issues are ironed out, the software buyer can continue negotiating without concern about what’s hiding in the shadows.
Three big areas to discuss upfront that might be software buying dealbreakers are:
- Security requirements – secure encryption and storage, breach reporting, data deletion, and other advanced protections are protections to consider.
- Functionality, training and user experience – be armed with information regarding the needed software functionality. Discuss these requirements upfront so you can assess the offering on its merits.
- Budget and capacity – share budget constraints early in the software negotiation process, but after securing market benchmarks. If the proposed cost is too far out of alignment with budget or benchmarks, you’ll know before wasting time in a negotiation that isn’t going to happen.
Manage software contracts proactively
Don’t wait until the last minute to purchase or renew software – you will lose leverage during the negotiation. Planning a negotiation strategy takes time and attention. Procurement professionals should start planning their contract negotiation strategy with a minimum 90-day window in order to evaluate all software needs stress-free.
Have full visibility into your tech stack
Did you know unused licenses account for up to 30 percent in SaaS waste? Poor visibility hurts negotiation strategy and leads to purchasing licenses that aren’t customized to fit the needs of the buyer’s company. To avoid dark spending or waste, it pays to give the license management aspects of the buying process extra attention.
A comprehensive view of your usage metrics is the first step of optimizing your software buying process to save money. It’s also important to know what software is in the company’s stack today, and how each product is being used.
Compare suppliers throughout the process
Use strategic sourcing to look into at least three products. Get preliminary contract details or requests-for-proposals (RFPs) in place, and then choose one to purchase. In addition to having three sales conversations, make sure that you’re comparing software reviews, customer testimonials and internal stakeholder recommendations.
An important point to consider when comparing software prices are the hidden costs and time investments of migration. Changing vendors incurs security and legal vetting, setup, and downtime. When deciding whether a competitor can better serve your needs, be sure to understand the total cost that isn’t just reflected in the contract price.
End the negotiation with a clear commitment
Don’t be afraid to commit. You’ve done your due diligence and determined one supplier as the best option. Consider adding years to the standard one-year term to leverage pricing. Software providers rely on renewed business and may offer better terms and more attractive prices.
Commitment is the final step in cooperative negotiation. Buyers have the leverage to offer something extremely valuable to sales reps: deal stability. In turn, they can offer competitive pricing and terms throughout the relationship.
SaaS negotiation doesn’t have to be a pain.
Starting from a level playing field in terms of deadlines, goals, and expectations can change the tone of a software negotiation and create a long-term relationship between the supplier and customer.
With years of experience and over $1B of negotiations under our belt, we’ve gathered best practices when approaching these SaaS buying conversations. We can help you improve your negotiation strategy and stay up to date. Contact us to learn more.