SAAS sellers increase prices faster than inflation and the typical growth rate of companies’ computer budgets, but the Vice-President of Gartner JO Liversidge analyst thinks that stupid buyers can reduce their bills by anticipating price increases and planning to negotiate hard.
Speaking during the symposium event of the analyst company in Australia last week, Liversidge said that SaaS sellers had increased prices between 9 and 25% this year. While certain price increases reflect exchange rate changes or the desire for a supplier to invoice more for their goods, many come after Saa companies change the measures they use to set prices or reconditioning licenses so as to make them more expensive.
“The hidden costs are not new in SaaS – Salesforce customers have processed storage costs for years,” said Liversidge. “But we now see a proliferation of hidden costs, in particular around the generating capacities of the AI.”
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Another way in which SaaS suppliers increase the costs is with “multipliers”, a program that includes credits that customers can spend on services under their subscription. “Many of these sellers reserve the unilateral right to change this multiplier,” said Liversidge. A service that costs 10 credits can reach 20 credits overnight, double the price. Users then burn credits in their subscriptions faster than expected and soon find themselves paying expensive excess user fees.
Whatever the technique that a supplier uses to increase prices, Liversidge says that SaaS Slingers increases more costs than the annual increase of 2.8% of IT budgets from the company that Gartner detects during the search for its customers.
Liversidge advises to retaliate with long -range planning which begins two years before a renewal of SaaS subscription. This long horizon gives organizations the time necessary to understand the complete extent of the use of the Saas in their organization, a necessary step because if you have separate licenses for Mulesoft and Slack – both held by Salesforce – you miss the possibility of negotiating a single subscription. The revision of the use of the SaaS can also reveal underused subscriptions, allowing you to see that some users could comfortably move to the lower subscription levels of a supplier without this movement ending in tears.
Two years is also a good period of time to plan a migration and let a supplier know that you are considering that the option can do wonders.
Long -range planning also leaves time for several cycles of negotiations, which means that you are more likely to conclude a better deal.
Geopolitical considerations
It is also worth considering how geopolitics can have an impact on your relationship with a SaaS seller, according to Luke Ellery, a vice-president of the purchasing management team, assets and Gartner sellers.
At the symposium, Ellery underlined a recent incident during which Microsoft suddenly abandoned a customer who appeared on a list of sanctions from the European Union. Microsoft acted to protect herself, said Ellery, and can do it because the contracts of Saa sellers allow them to refuse services in certain circumstances.
Events of force majeure such as natural disasters or wars are one of the reasons why SaaS operators can cut you, which, according to Ellery, seems fair enough until you consider that your online software source is not obliged to tell you where they execute their servers or store your data.
“Sellers transfer the risks of governance to customers,” he said, and you can therefore risk a breakdown without knowing it.
He therefore recommends negotiating exit provisions to ensure that you can continue operations if a SaaS supplier decides to abandon you, including by organizing a sequestration of data – in which your information is held by a neutral third party – to help in business continuity.
“Test your supplier’s continuity plans,” added Ellery, by practicing key workload movements in different data regions.
“Do not accept increases as an agreement concluded,” concluded Liversidge. Organizations that learn to negotiate with Saa suppliers benefit from competitive advantages. “Those who do not find themselves struggling with unsustainable costs,” she warned.
Ellery also suggested developing negotiation skills.
“Continuous price increases are the standard,” he said, and predicted that the acquisition of VMware by Broadcom, which has seen prices increase up to 1,050%, has been noticed by other suppliers who are now wondering if they can do the same.
“We are worried about the VMware effect,” he said. “Broadcom showed the market which is possible.” ®