Ever heard the one about the Salesforce AE who contacted their customer because they were paying for more seats than they were using?
Unfortunately, we can’t always rely on our SaaS vendors to be transparent when it comes to contracting, pricing, and billing. Many providers practice dark billing patterns that cost customers money that they never agreed to—and often charge their buyers for software they aren’t using at all.
Since SaaS vendors are under pressure to grow every customer account on an annual basis, they aren’t always transparent to their customers about usage. That’s why it’s important for SaaS managers to become procurement pros and understand the best ways to stay on top of their SaaS contracts and spend.Ever heard the one about the Salesforce AE who contacted their customer because they were paying for more seats than they were using? Me neither. Click To Tweet
Read on for our top 7 SaaS best practices for contracts, pricing, and optimization.
7 SaaS best practices: Get the most from your vendors
SaaS Managers are tasked with knowing which tools are the best for their business and which tools need to go. Guidance from a SaaS management platform can help these buyers follow best practices that cover everything from contract negotiation all the way to data security.
These SaaS best practices will get you up to speed.
First, find duplicate SaaS tools
Before you can optimize your SaaS management, you need to know which SaaS tools have been purchased. Start by conducting an audit of your existing software stack. Depending on the size of your company, each team may be using a different vendor for a common need, like project management or application monitoring.
To identify and remove shadow IT (all those one-off credit card purchases), follow our SaaS Utilization Audit Checklist:
- List your applications
- Identify new apps since the last audit
- Track logins and utilization
- Measure change in logins and activity
- Visualize renewals
The next step towards properly managing your SaaS vendors is to review your contract. There are two ways to purchase software, as an individual who has little bargaining power, or as a business that has leverage to ask for favorable concessions:
- An individual completes a click through agreement. This means that they’ve agreed, on behalf of your company, to the standard terms and conditions of the contract, as well as the consequences.
- A qualified member of the IT team, plus an executive with buying power, negotiates a contract with the SaaS provider.
Your organization can negotiate for additional discounting, redlined legal conditions, tiered pricing, and even safer payment terms.
Standard SaaS vendor agreements often include an auto-renewal clause. It’s important to know what you’re committing to before you sign. You may only have 30 days before your renewal date to make changes or cancel your account. If you miss that date, you’re contractually renewed for another term.
To avoid being locked into a new annual commitment, follow these renewal best practices:
- Know your renewal dates, auto-renewal clause, and cancelation period in advance (hint: this is something Quolum can help you with)
- Schedule time with your sales rep to discuss your renewal at least 90 days before the due date
- Provide an early notice of non-renewal. This gives your sales rep time to address any product, usage, or contract concerns and come to the table with their best offer to keep your business
Right size your contracts
Ideally, you’ll want to track the usage of all of your SaaS tools throughout the year. A SaaS Management solution can help you keep track of these changes through usage metrics like user log-ins, feature use, and employee sentiment.
If you see that your organization is only using half of the licenses you purchased, or users only log in to the tool sparingly, you can plan ahead to either downgrade your contract or cancel your agreement entirely.
Ensure security compliance
Meet with your IT, finance, and legal team to understand the risks in your vendor contract. Your company needs to follow regulatory standards to protect your data, and that of your customers, and there can be items in your contract that put you at risk.
Make sure you’re protected against:
- Data breaches due to your vendor’s lack of compliance
- Unknowingly giving vendors access to your user activity data
- Limitation of liability clauses that let vendors off the hook, even if they’re responsible
Find the right pricing and features
Understand how your vendor’s pricing plans work. Many SaaS providers sell tiers or editions like Standard, Pro, and Enterprise levels. Each one has a set of features and limitations with increasing price tags. Be wary, some of these plans are intended to lure you into paying a higher price but don’t always deliver much more value.
For example, you may initially purchase licenses in the Pro edition of a tool for your ten sales reps to use. As your company grows, you add new licenses to your contract. What you may not realize is that the Pro edition only allows up to 50 users. To add a 51st user, you need to upgrade to Enterprise, which has features you don’t need, and pay double the license cost just to get that one additional license.
Try and plan ahead for the features you’ll need down the road. You can start discussing the right number of licenses for the right features well before your renewal date. Securing a clause for up to 100 Pro licenses in your contract can reduce your spend significantly.
Other pricing considerations include:
- Net price – what unit are you purchasing? Can you pay less if you purchase more of that unit upfront rather than later?
- Fees – are there implementation costs, training costs, or paid integrations?
- Support costs – do you have to pay for better customer service? What do you get in each support tier?
Always be optimizing
Schedule regular reviews of your SaaS stack. This helps you see trends and where you are wasting money on Shelfware – SaaS subscriptions that aren’t being used. Gartner says that IT operations may leave as much as 25% of their software unused on the shelf.Gartner says that IT operations may leave as much as 25% of their software unused on the shelf. Click To Tweet
Tracking your usage across all of SaaS vendors helps protect your company against the lack of transparency offered by the vendors themselves. Otherwise, they won’t provide a clear overview of how much value you are getting from their products – and they’ll hope that your contract will auto-renew quietly.
Level up your SaaS best practices with the right management tool
SaaS management tools like Quolum can help your IT department monitor your SaaS vendor usage and spend to ensure that you’re getting the most out of your software vendors. Our SaaS management platform gives customers all the data they need to ace their negotiations.
Add in these best practices and you’ll be negotiating contracts that include the features you want, at the price point you like, and with the security you need.