How to reduce your SaaS spend by 30% by 2023

How to reduce your SaaS spend by 30% by 2023

As founder and CEO of SaaS procurement platform Vertex, Eldar Tuvey is responsible for driving the company’s strategic direction and growth.

The current state of affairs paints a worrying picture for SaaS buyers.

Our data shows that SaaS inflation is about four times higher than overall market inflation. In particular, SaaS spending is growing at 5x market inflation in the UK and Australia and 3.5x in the US.

Those would be alarming numbers in any economy, but rising software costs should sound alarm bells for CFOs trying to drive growth during an economic downturn.

One of the reasons why SaaS providers can raise their prices year after year is that many hide their pricing information. As a result, buyers lack the knowledge to negotiate high-level deals in their software contracts.

Since there is no benchmark for what other companies pay, many companies charge higher prices for enterprise-class software plans. So much so that our data shows that up to 90% of companies are paying 20-30% more for their SaaS products.

What can you do?

Supplier prices are rarely set in stone and buyers have more purchasing power than they realize as they approach negotiations and are equipped with leverage. When your company reaches out to sales teams to inquire about SaaS solutions, there is often room for contract negotiation.

Finance and procurement teams should be aware of negotiation tactics that can be used to obtain SaaS products at a better price and avoid common software negotiation pitfalls. If you want to reduce your software costs in 2023, here are recommended strategies for securing long-term SaaS contracts.

If reducing SaaS costs is your company’s top priority in 2023, improving your software trading strategy is the right place to start.

Give yourself plenty of time to prepare.

The first step to gaining leverage in negotiations is to take your time.

Contact a supplier to renew or accept a new contract well in advance of planning a new product launch. First, you need to understand your needs and thoroughly research which tools are best suited to meet them.

Make a short list of tools to get you started and consider:

The number of licenses the company needs. The required level of support and maintenance. The features you consider essential and would be nice to have. The budget you are willing to spend.

This allows you to enter into negotiations with the knowledge and time you need to get the best deal. If you don’t take that time, your provider may recognize that you need to change quickly and respond with rigid terms. While there is no one-size-fits-all solution, we generally recommend that the average company begin the procurement process six to eight months before contract renewal.

Consider the duration of the contract

Source: La Neta Neta