Most businesses extensively use SaaS products to automate their day-to-day operations. However, not everyone is aware of SaaS contract negotiation tactics. Outside of the obvious regarding pricing, software negotiation tactics can help negotiate warranties, better support facilities, limitations of liability, and other relevant contractual clauses. If the concept of a SaaS negotiation process is new to you and you’re looking for tips and strategies for negotiating your SaaS agreements, you’re in the right place.
In this blog, we’ll cover the key areas your procurement team and other stakeholders involved in the SaaS agreement process should pay close attention to.
Questions to ask while negotiating SaaS contracts
In order to gain a competitive edge in the negotiation process, it’s best to have a clear idea of your priorities. This will help you present a better case while negotiating SaaS contracts, but also show your SaaS providers that you’ve done your homework. Ask these questions to help you identify any potential red flags in software license agreements.
- Access rights and users
- What defines a user and how many users get access?
- Is the scope of the license well defined in the contract?
- Are any rights to the SaaS application transferrable; if so, what are they?
- How is the pricing represented in the agreement?
- What is the annual expense incurred when all revenue streams are included?
- Are there any other chances of additional fees in the future; if so, what are they?
- Does the agreement cover any performance requirement set forth by the organization?
- This could include an uptime guarantee, API integrations, support response times, and more.
- What’s the preferred type of license?
- Does this SaaS vendor offer a multi-year or single-year license?
- How will the term license be renewed at the end of the term?
Key areas to negotiate in SaaS agreements
Although SaaS agreements don’t have lock-in periods, they do have their own fair share of challenges, like contract renewals and SaaS contract management. We’ll walk you through some of the key value levers you can use to support your negotiation conversations with your suppliers.
- Pricing – many buyers aren’t aware of the fact that they can buy SaaS for less. Here’s some advice that can help you negotiate the pricing of your SaaS purchases like an expert.
- Putting off your software purchases until the last minute gives you little to no leeway to negotiate – start early.
- To find similar products for less cost, do a feature-wise comparison, and use them as leverage in your negotiation.
- Identify a list of features that you can do without, look for support options that you won’t need, and use them to negotiate a better agreement.
- If applicable, try negotiating for a multi-year contract, which will give you the opportunity to negotiate lower rates.
- Keep your expansion plans and future users in mind when you negotiate the pricing.
- Renewals – start negotiating SaaS contracts at least a quarter in advance for yearly contracts, and a year in advance for multi-year agreements.
- Be prepared, SaaS service providers will be looking forward to pitching new solutions and upselling opportunities that maximize their revenue.
- Support – in addition to traditional support, support also includes the delivery of software updates and continued maintenance of the SaaS platform.
- Organizations need to carefully read the support services clause to ensure there aren’t limitations to these services, and that they don’t incur additional charges for availing them.
- Always take the time to review the quality of support that you’re bound to receive. If the product is bound to be a critical solution for your organization, negotiate for dedicated support staff like account managers.
- Warranties – warranties are a frequently overlooked clause in the SaaS agreement. Normally, warranties cover instances like performance hiccups, infringement issues, and cybersecurity measures. Look for nuances such as limitations in the case of a breach.
- Limitation of liability – a limitation of liability clause helps your suppliers put a cap on the monetary value or eliminate the associated risk altogether. Make sure that there’s at least a small cap on the amount of direct damages made to the product. While negotiating SaaS contracts, you can also ask for a higher cap on liabilities like data breach.
Leave the Negotiations to Us
Even with the help of sought-after law firms, SaaS negotiations may appear elusive. You need a rock-solid negotiation expert by your side. Hiring a negotiation expert in a competitive market is easier said than done. If you’re on the search for SaaS negotiation experts who can take the task of SaaS contract negotiations expertise off your plate, contact SCS today. We can help you stay on top of your contracts, renewals, and get the best deal with 20+ years of analytic pricing data.