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Vendor Negotiation Tips to Survive an Economic Hardship

vendor negotiation tips

Despite reassurances from experts, the fears of a recession remain. This poses the question: should a recession occur, what will your organization do?

The natural response is to cut costs where possible. As an organization on average pays $45M a year on its SaaS portfolio, it is a natural place to start. However, how are you to do that without sacrificing utility?

Portfolio size and spend

As SaaS has become more essential to organizations in all industries, the prospect of cutting these costs risks eliminating the necessary functions they perform. There has to be a better way.

While SaaS renewals are usually your once-a-year option to make changes, extenuating circumstances may create an exception. One answer is to work with your SaaS vendors to negotiate terms that provide relief during hard times. Consider these vendor negotiation tips.  

Build a Long-Term Relationship With Your Vendor

Partnering with vendors is a good option to reduce costs when you need to get through difficult financial times. Whether it’s long- or short-term solutions, vendors will often work with you when hard times come around. However, it’s important to remember that this is a two-way deal.

Partnering with vendors means building a healthy give-and-take relationship.

If you’re looking to ask your vendors for arrangements that allow you more breathing room, you need to be willing to return the favor in some way.

In some circumstances, this means possibly extending terms or agreeing to marketing exercises that will help the vendor. Regardless, you’ll need to be willing to show your vendor that you have your mutual interests in mind. Figure out what deals would create a win-win situation for both parties.

Not only will this improve your chances of getting a better deal with your vendor during hard times, but it also helps build a long-term relationship that you can rely upon. What’s more, vendors find this long-term stability an incredible value. That’s why many are willing to trade this commitment for “per unit” margins. 

But you may ask, “is it possible to negotiate better terms with my vendor when we’re already locked into a contract?”

The answer to this question depends on the vendor, but it is typically difficult. However, working with them to establish a long-term relationship that offers them the stability we discussed opens the discussion for options beyond dropping your annual commitment.

With that established, let’s go over some of the potential options you can discuss with your vendor when negotiating through financially hard times. 

Push for More Favorable Payment Terms

There are numerous options available to an organization looking for solutions to cut their SaaS application costs. These involve reaching out to your vendors to discuss more favorable terms on your payments.

A short-term improvement to cash flow may be just what you need to sustain your business through a crisis. 

To this end, here are some terms you should consider requesting:

  • Suspend or postpone payment obligations. This option can grant immediate relief if you can negotiate it with your vendor. A period of 6 to 12 months may give the economic situation pressuring your company time to resolve itself.
  • Change annual payment terms. By changing these terms to quarterly or even monthly payments in arrears, your organization may be able to mitigate and delay impacts on your cash flow.
  • Consider short-term financing options. Whether it is through a bank or the vendor, financing over short periods on big-ticket investments will reduce the immediate impact they have on your cash flow. Therefore, your organization gains breathing room during difficult economic times.
  • Extend contracts month-to-month. Avoiding long commitments and upfront payments with vendors until the economic conditions improve gives your organization options for future cost-cutting. 

Taking the time to negotiate such terms with vendors may seem like a daunting task. However, you can turn to Zylo to help. Our negotiators will go to bat for you to help streamline SaaS negotiations. 

Reduce Services Fees

A compromise that’s potentially easier for the vendor is to reduce the scope of their service. That’s to say, remove unneeded features.

Consider your existing agreements with vendors. In some cases, organizations acquire SaaS applications through click-through agreements. These agreements heavily favor the vendor. This presents an opportunity to renegotiate an agreement more tailored to your organization’s needs.

Negotiating SaaS contracts is a powerful option for creating a greater financial buffer while maintaining the vital utility of those SaaS applications. 

Additionally, understanding your SaaS application allows your organization to take rightsizing measures. These allow you to reduce the costs of your SaaS portfolio by downgrading to less costly licenses or eliminating underutilized licenses.

With Zylo’s managed services, you get a team with you every step of the way to create an optimization roadmap with immediately actionable insights, and even help you negotiate contracts.

Get Additional Licenses and Consolidate

This option may seem counterintuitive. However, by adding licenses to your agreement with a vendor, you may find yourself able to consolidate your SaaS assets. This is particularly useful when you’re seeking to reduce redundancy in your portfolio.

This is a major benefit of SaaS rationalization.

Sunsetting overlapping applications in favor of consolidating licenses down to fewer applications frees spending to either reinvest or create a financial buffer during economic hardship. 

Not only do you save money from the cut applications, but you will improve your existing relationship with the vendor of the app to which you consolidate. Which, as we discussed, provides you with more potential flexibility.

Work with Vendors for Better Long-Term Security

Negotiating with your vendors does more than provide a reprieve during economic hardship but helps optimize your SaaS assets for better financial security.

Fostering long-term relationships with vendors through win-win agreements offers options that would be otherwise unavailable to a business.

Vendors are often willing to work with businesses that are open to give-and-take solutions. And not just during challenging economic times. Learn how to negotiate SaaS contracts that put partnership at the forefront – from the start of your relationship.

Schedule a demo with us today and see how we can help your organization manage your SaaS assets, negotiate with vendors and save without sacrificing utility.