Recently, Microsoft and NetApp (amongst other tech giants) gave cloud customers cost-cutting measures as reasons for nightmarish employee sack decisions.
Paying for only what you use when you use it and where you use it when it comes to cloud services provisioning is a major side attraction.
And the reason for the customer appeal lies in affordability.
Intuitively speaking, it is a better use case when you have the option of avoiding tieing down huge sums of capital required to procure high-cost IT infrastructure.
Such lump sums are instead split up in terms of unit costs per use of either software or hardware.
This is the beauty of cloud solutions. However, for reasons bordering on the harsh global economic realities, cloud services clients, especially SaaS customers, have decided on doing away with aspects of the IT infrastructure they have been renting.
What can be the problem now? Are cloud solutions no longer affordable? Are the cloud options no longer appealing?
Eldar Tuvey, founder and CEO of SaaS purchasing platform Vertice is responsible for driving the company’s strategic direction and growth.
He paints the grim picture as follows: "The current state of affairs paints a concerning picture for SaaS buyers.
"Our data shows that the SaaS inflation rate is around four times higher than the general market inflation rate.
"Specifically, SaaS expenditure in the U.K. and Australia is currently growing at a rate five times higher than market inflation — and in the U.S., a substantial 3.5 times more.
"These would be worrying figures in any economy, but for CFOs attempting to drive growth during an economic downturn, soaring software costs should be ringing alarm bells.
"One of the reasons that SaaS vendors are able to increase their prices year after year is that so many obscure their pricing information.
"As a result, buyers lack the insight to negotiate best-in-class deals on their software contracts.
"Without a frame of reference on what other companies pay, many are quoted higher rates for enterprise-level software subscriptions.
"So much so that our data indicates that as many as 90% of companies are overpaying for their SaaS products by 20%-30%."
First, it's important to remember that vendor pricing is rarely set in stone.
As a service buyer, aside from being equipped with leverage, you have more purchasing power than you realize when approaching negotiations with suppliers.
Each time your company reaches out to cloud solutions sales teams to inquire about SaaS solutions, you have more room to negotiate the contract than you think.
It's necessary that finance and procurement teams understand and realize the negotiation tactics that can be used for purchasing SaaS products at better prices so that common pitfalls associated with software negotiation are avoided.
As a matter of fact, should you be looking for cuts in your 2023 software costs, the following strategies are recommended for securing long-term SaaS contracts.
You need to work on improving your software purchase negotiation strategy.
Plan, plan, and plan. Yes, enough cannot be said about adequate planning as your first step toward having good negotiation leverage.
Always be ready to approach a vendor for contract renewals before going ahead with onboarding the new product.
More than anything else, you must understand your business needs beforehand and comprehensively research the cloud tools that will serve them best.
In line with this initiative, you need to compile a comprehensive list of tools required and then consider the following:
Based on the above steps, you are sure to participate in negotiations with the knowledge and time to fetch you the best deal.
Without satisfying these requirements, your supplier would likely assume you need a quick turnaround, availing you only with inflexible terms.
Since there's no all-encompassing solution, be advised that, on average, companies only begin procurement processes six to eight months ahead of the contract renewal.
It's then up to you to consider your contract length.
The evolving global economic recessions have unearthed spending patterns amongst cloud customers hitherto unimagined.
This is coming on the heels of service provisioning costs masked by service providers.
Overall, the cloud customers (especially the SaaS players) are trying to beat the odds and this is forcing the service providers' revenue profiles on the decline.
The consequence is that the latter are laying off staff to keep up with operational costs.
CWG Plc, formerly Computer Warehouse Group Plc was founded in 26 September 1991,...LEARN MORE
On May 16, 2001, MTN became the first GSM network to make a call following the g...LEARN MORE