2020 was a bumpy ride to say the least. The pandemic not only created huge shifts in the capital market across industries, it also prompted digital transformation for many workplaces.
Organizations that were once accustomed to standard business practices and face-to-face communication were forced to adjust to remote work relying on technology to help facilitate the transition.
While you might not have given much thought to how you bought SaaS prior to 2020, it’s never been more important than it is today.
SaaS buying likely won’t slow down this year and getting ahead of your software documentation can mean the difference between over paying and saving money on duplicative buys by thousands of dollars.
We teamed up with The CFO Leadership Council in a recent webinar to cover everything high-growth companies need to know about how to buy SaaS in this new landscape.
Our panelists, Former Oracle CFO Jeff Epstein and Vendr Head of Sales Andy Smith, discussed recent SaaS buying process trends and how leaders can best improve their company’s capital efficiency.
Looking to improve your company's SaaS buying process? See how much time and money you can save with Vendr.
Top 3 takeaways in SaaS buying
1. 4 steps to better operations: Simplify, standardize, centralize, automate
For finance leaders, especially at high-growth companies, it can be extremely difficult to try to operationalize buying net-new software and managing renewals. With urgent requests coming in daily from various department heads without centralization, this quickly becomes a burden for growing organizations.
Jeff explained Oracle’s secret sauce for improving company-wide efficiency and creating a 40%+ profit margin. To improve operations across the board, they relied on a four-step process — simplify, standardize, centralize, automate.
While there are several ways to define a purchasing or procurement process that are equally efficient, it’s important to decide on one single process to standardize it across the company.
You'll want to pick one operations tool which works for most of the organization. Although you might have some edge cases where a few people are on a non-standard tool, if the majority of people are on the standard software tool, your organization will solve the 80/20 problem and be more efficient in the process.
From there, you need to centralize the single best process done by one team, in one location, at a shared service center. And, finally, once you’ve simplified, standardized, and centralized, you can automate.
One of Jeff’s biggest tips was to avoid automating at the beginning, because then you’re automating something that’s complex, conceptualized and not standardized, which will only lock in inefficiencies.
2. Give yourself agility in the negotiation process when purchasing software
It’s easy to fall behind in managing SaaS suppliers. Auto-renewals sneak up on you and before you know it you’re locked into another year without optimizing your spend first.
Andy’s seen firsthand how fast-growing companies who go from 100 to 300 employees can quickly lose track of tooling and renewal dates, which in turn eliminates any runway you might have to investigate your options.
His recommendation for staying on top of this critical information is to centralize all of your SaaS buying in one place to avoid any missed opportunities. That could be as simple as an Excel spreadsheet with renewal dates or a SaaS management tool to automate the process.
At a fast-growing company, the software stack is likely to change daily as departments buy and renew SaaS. So to Jeff’s point, don’t just create a list. Create a process for keeping that list current.
Knowing your renewal dates can also help you get ahead of the negotiation process. If you start negotiating a few weeks before the renewal, you limit your flexibility. If you start six months ahead of time, you can create credible alternatives or your BATNA, giving you stronger leverage in the negotiation process.
With more lead time you can route the potential buy through the necessary legal, security, and internal approvals you might need — reducing friction for the seller and hopefully increasing flexibility on pricing.
Lastly, give yourself that agility when signing agreements. Look out for one-year contracts wherever possible. Technology moves quickly and pricing is variable and subject to change. Those alone are going to impact your decision to double down on your suppliers, so it’s best to be proactive and get ahead of it. You can’t always secure a one-year agreement, so instead exercise caution on multi-year contracts.
3. Back your SaaS buying process and decisions with data
Purchasing software is one of the more difficult expenses to forecast and plan for. That’s partly because it’s difficult to know what your future needs will be and what speciality tools you’ll need, and partly because the price changes.
SaaS companies anchor their pricing model to a specific metric that could be unknown to you. For instance, the price might be determined by your company size, the number of seats you need, or volume-based, to name a few. Plus pricing models can change as SaaS companies get new leadership. They might move off of a user-based to a consumption-based model and vice versa. Based on those changes, software can become increasingly expensive and might not be a viable option for your business.
That’s why it’s important to back your purchasing decisions with data, similar to most other business decisions. Oftentimes it’s easy to trust that the sales rep you're interacting with is giving you a fair price when buying software, especially if you’re not a key stakeholder in the process often, it’s not your main priority, and you’re trying to move quickly.
One way we help our customers at Vendr is by keeping a constant pulse on the SaaS buying market to identify those changes ahead of time so our customers can make proactive decisions. We keep track of pricing changes on a weekly basis and report on any trends we may have noticed. To give you an idea of what we’re typically seeing, we noted 35 pricing or packaging changes across our suppliers just last week.
Digital transformation moves quickly which makes it difficult for executives and finance leaders to predict future expenses year over year – but it doesn’t need to be.
Whether you’re starting from scratch or looking to improve your organization’s existing buying process, we’re here to help. At Vendr, we’ll compare your SaaS stack to our data from over $300M+ SaaS transactions to figure out how much you could save year over year, for free.
Share your SaaS stack with us here and we’ll get in touch to chat through best practices for improving your company’s buying process and overall capital efficiency.
For the full conversation, check out the webinar recording.