It’s a lot to manage the renewals for all your applications, not to mention negotiating SaaS contracts to get the best price and terms. With the average organization having 323 applications in their portfolio and one SaaS renewal every business day, there’s more than enough to keep you busy. And that’s not counting any new software your organization is buying.
The truth is, you need a dedicated resource to be successful at negotiating SaaS contracts. Read: get favorable agreements for your company that maximize the value of your investments.
But, let’s be real here. How much time do you really want to spend negotiating? With those 323 apps (and more for large enterprises), that turns into a full-time job. And takes you away from other important, strategic work.
Case in point: The average company has more than 200 renewals with approximately eight hours required to conduct each renewal. That means you’re looking at 1,600 hours each year. In contrast, a full time job is a little more than 2,000 hours.
If you have a small team, no team, or just need some extra hands, it’s time to consider getting some help. We sat down with our Services Director, Chad Hinen, to understand how organizations can partner with a company like Zylo to outsource procurement.
Negotiating SaaS Contracts: Q&A with Chad Hinen
Let’s start with the basics. Why is negotiating your SaaS contracts so important?
Chad Hinen: SaaS agreements – particularly at the enterprise levels – are always negotiable. Providers typically have a high margin to work with and will partner with customers to find the right price point that can suit both party’s needs (your budget and their reasonable margins needed to grow and provide services).
When these agreements aren’t negotiated, you are leaving a lot on the table that could be put directly back into your organization’s bottom line. We’ve found that, across the board, companies overpay on their licenses by at least 15%.
How does contract and renewal negotiations fit within an organization? Who is typically responsible for it?
Chad: If an organization is large and mature enough to have a dedicated Procurement organization, that group typically owns negotiation of SaaS agreements. Absent that, SaaS agreements are typically negotiated by one of two groups (or often both):
- Individual stakeholders acquiring the solution to execute their day-to-day job
- Corporate IT responsible for enterprise-wide solutions
The challenge here is that these groups understandably do not see negotiating agreements as a strategic part of their role. It pulls them away from critical day-to-day responsibilities, where they should be focusing on the key value their role drives to the organization. Not to mention, they don’t have the right skills. They’re not set up for success.
Where have you seen companies fail at negotiating SaaS contracts? Any specific examples you’ve seen play out in real life?
Chad: Too commonly, the honest answer to the question, “Who negotiates your Saas agreements?” is “I’m not sure”. Or worse, “Nobody.” The cost of doing nothing is a hit on your organization’s bottom line and has a direct impact on budgets.
In reality, companies typically lack two key elements to successful SaaS negotiations: resources and data. Time and expertise is needed to run a negotiation, and data is needed to understand the quality of the commercials being offered.
What are common signs that an organization needs help with negotiating SaaS contracts?
Chad: First, if they don’t have a clear answer to the question, “Who is responsible for negotiating your organization’s SaaS agreements?” As I’ve mentioned before, you need time and expertise to do negotiations well. Certainly, there are specific vendors you prioritize and may like working with. But you can’t manage all 300+ applications yourself. Leaving it up to the organization is a recipe for chaos.
Further, they don’t have a good sense of how their pricing compares to the market. Access to SaaS benchmarking data is critical to ensuring you get the best deal. Sure, you could ask your friends and industry peers. However, an outsourced resource will have a greater purview and data at their fingertips.
How does outsourcing negotiations work?
Chad: At Zylo, our Managed Services experts, with procurement and SaaS negotiation experience, are brought in to fully own the negotiations. They collaborate with internal stakeholders and drive the negotiation directly with the provider. Zylo resources are set up with contractor-level access and structure to support better collaboration and support internally with stakeholders, as well as engagement with providers.
Our customer Ryan Johnson, VP of IT at Versapay, describes the partnership.“Our SaaS Manager is an embedded member in my team. The reception has been remarkably positive and we’ve seen immediate value.”
To add color to Johnson’s experience, we become a member of your team. We learn your process, manage end-to-end negotiations and contract administration, and build relationships with your vendors.
In contrast, there are services in the market that do more damage than good. They don’t understand your business. They damage vendor relationships. And ultimately aren’t a true partner.
At the end of the day, outsourcing procurement should be helpful to your organization. We found that our customers have saved upwards of 20% by using Zylo alongside a Negotiator resource. Not to mention a true partnership mentality.
Lauren Pukacz, Senior Global Director of Procurement at Talkdesk, shares her experience using Zylo Managed Services. “Our services manager has become an extension of our procurement team and has helped us save a lot of money. She accomplishes as much as a full-time employee — without us having to add additional headcount.”
What are the benefits of outsourcing SaaS contract negotiations?
Chad: This allows you to bring in a resource with negotiation experience with little-to-no ramp time on things like SaaS structures, SaaS Management, and contract negotiations. Rather than the cost and effort to bring on a full-time employee, a partial resource can be plugged into this role with less ramp effort and cost.
To give you an idea of the time savings, Johnson shared that he saves approximately 10 hours each week by outsourcing negotiations and SaaS management. Or, like our example above, that could be 1,600 hours back to you and your team each year. Imagine what goals you could achieve taking back that time!
How have you seen organizations be successful with outsourcing their negotiations?
Chad: It starts with choosing the right partner. Resources managing your agreements and structure matter. Do they have the right background and skill set? How does the partner set up their structure with customers? What does the division of labor look like? How will this impact the company internally and with vendors?
There must be a primary party responsible (on both sides) for owning the relationship and providing a consistent level of service and engagement. The people responsible for owning collaboration and negotiation need to be dedicated in supporting the partnership between the negotiating parties. They’re not there to “beat up” the provider and risk damage to the overall partnership between the two parties.
Save Time and Money with a Dedicated Procurement Resource
Having a procurement partner that’s an extension of your team is clutch for organizations, especially when it comes to negotiating SaaS contracts. From time savings to cost reduction, it’s a critical function and piece of your SaaS management strategy. Learn more about how Versapay has leveraged Zylo’s Managed Services here. Or, reach out to us for a demo to see how our platform and services can power your SaaS management strategy.
Looking for more on this topic? Check out our SaaS Renewal Management Resource Center with tons of advice on getting the best deal, operationalizing your renewals, and more.