Acquiring New Technology - Why you need a SaaS purchasing strategy

Tamar Katz

For a startup, every new technology purchased feels essential and pivotal to success. Software is brought on with a purpose, hoping to fill a gap or build new capabilities. Whatever the reason, each team or team member chooses the tools they need to succeed. Though technology purchase decisions are made with good intentions, even the smallest of startups can find themselves with underutilized software and overpriced contracts.

Growing pains (at least some) can be avoided. Instead of settling on a quick purchase of the most ‘affordable’ software plan, the combination of a purchasing strategy and a financing tool can help secure the best technology with the most financial stability.

Why a Purchasing Strategy Matters for Acquiring SaaS Technology

Companies in their early stages tend to tackle new purchases bottoms up. They buy tools their teams request without completing a long-term strategy or plan for how the technology stack will scale with the company.

As the company grows and establishes its market fit, very often the technologies that felt urgent and critical in the beginning become obsolete or underutilized.

Challenges experienced over time with technology purchases:

Duplicate products in your tech stack - Different parts of the organization using the same technology but on separate plans
Underused tools - Only one member (or a small number) of the team using a technology
Spiraling contracts - As technology companies grow, they may begin increasing pricing for those who do not have a contract locked in.
Tools that can’t scale - Tools designed for early-stage startups that can’t offer the services a company needs later: security, functionalities, integrations, larger volumes

Having a purchasing strategy in place early on drives alignment on key topics both bottom-up and top-down, and it helps an organization prepare for shifts and changes in the future. Challenges will occur when buying any new technology, but being prepared will limit the financial burdens later. Finding the right SaaS (software as a service) solutions will save the company money in the long run and flex as the company grows.

Short-term plans are well and good, but prioritizing the deep work of a long-term vision for your technology stack will allow a company to scale and adapt at a faster rate. Just think, a year down the line you can focus on enjoying your current tech stack versus stressing about replatforming or starting a fresh buying cycle.

Key Considerations for a SaaS Purchasing Strategy

Mapping out a purchasing strategy doesn’t have to be another massive project to add to your list. There are two key areas to explore when developing what works for your organization.

Conduct a Gap Analysis to Identify Pain Points and Discover Needs

This phase focuses on information gathering. No need to make extra meetings or tasks specific to it. These types of conversations can be included as a line item in already occurring cross-functional meetings and discussions. Questions to ask at this point are focused on what technologies other teams are already using, what tech they need to accomplish goals, and the potential long-term fit for those tools.

An even more exciting part of discovering your tech needs is establishing a ‘tech stack wishlist’. Every team has a mental list of dreamy tools and software they covet, but maybe the price tag is too high at the moment. A shared wishlist of desired tools helps teams and the broader company build long-term plans more clearly. They can be ready to move when new resources become available.

Establish a SaaS Evaluation Framework

The specific criteria used to weigh different technologies and purchasing decisions can vary from company to company. The categories can also change over time as your company moves beyond the initial pre-seed stage and through each funding round. Four key areas every company should include in their SaaS purchasing evaluation:

Security

As your company grows, the security demands from your customers will also grow. Expanding globally or taking on bigger customers will increase the complexity of compliance. Technologies you use today may meet your current requirements but also need to fulfill your long-term vision. Evaluating SaaS in this way, you’ll be able to sell to a broader customer base sooner than anticipated.

Integration

When evaluating software, a focus on integration not only means whether or not your different tech tools play well with one another. It also includes comparing the benefits of a full platform solution (with built-in integrations) versus a point solution. Also a part of the research, different versions of one software may support a higher number of integrations than other versions or tiers.

Scalability

There are different ways to interpret the scaling of a tool: how it scales as your company grows in volumes and how it scales as your company grows in scope. Consider which tier your company might enter into in the beginning and which tiers or plans might be a better fit as you scale up (or even sometimes scale down) in the future.

Budget

Budget isn’t as simple as thinking, “Here’s a set amount of money. What technology fits into that budgeted amount?” Even though a technology might be ‘in budget’, it might not have a high ROI. Additionally, negotiating fair pricing and taking advantage of incentives like discounts for longer contracts can help bring a technology, previously assumed as overpriced, into budget.

Alternative financing tools like Gynger allow you to look at your budgeted amount from a different angle. What may have been too expensive as an upfront payment might become affordable as Gynger allows you to spread those payments out over time.

Leveraging Payment Terms to Optimize Your Saas Purchasing Strategy

Variable payment terms have permeated into many different levels of our lives. Even as consumers, we’ve learned we can save money on a streaming service or a fitness app by paying upfront instead of monthly. Purchasing SaaS comes with even more variety in pricing and opportunities for better terms.

Different payment terms:

Monthly - Commonly associated with the lowest tiers of a product, these terms offer a fixed monthly expense over a period of time, but typically come at the highest net effective pricing..
Quarterly - These payment terms are good options for companies who are in a state of constant change and want some flexibility in payments, services offered, and volumes while retaining some of the negotiation power of longer term commitments.
Annual - Annual upfront payments regularly offer the best overall ROI, along with higher tiers of support and technology integrations. These terms do have the larger upfront monetary commitment and can be difficult for those with limited liquidity.

Optimizing SaaS Costs Through Different Deal Structures

Multi-Year Contracts - These types of terms are exciting but often require strong financial negotiation. If you’re able to agree to multi-year commitments, you can negotiate elements like reduced running costs, access to additional products, customer support, and sometimes a tailored product for your company.

Multi-Product Contracts - Bundling multiple products into one purchase streamlines billing cycles and renewals in addition to unlocking the potential for discounts. A SaaS provider often has different products, services and tiers which can be purchased in a single transaction. This kind of transaction most likely involves partnering with other parts of your organization to align on a set of tools or services together, but there is major value in working this into your strategy.

Committing to Upfront Payments - Agreeing to a price is one thing, and agreeing on when it will be paid is another. Most software companies will offer discounts for paying upfront. Paying upfront for an annual contract can be expensive, let alone a multi-year, multi-product deal, but the overall savings can make paying it all in the beginning very enticing.

How SaaS Contract Financing Unlocks Bigger Savings

The payment terms and deal structures mentioned above can lead to savings, but they’re not always an option. Paying upfront can put a dent in cashflow, multi-product contracts can substantially shorten runway, and multi-year contracts can negatively impact your burn rate.

As a start up or fast growing company, is it possible to have the best of both worlds: negotiation power and savings on one hand and consistency and predictability of finances on the other?

Here at Gynger, we make that dream become reality. You execute your software purchasing strategy and negotiate your contracts. Gynger pays your vendors, and you decide on payment terms that work for you: monthly or quarterly payments over time.

The benefits from financing your tech spend:

Streamlined payments - All of your tech purchases can be consolidated into a single monthly payment in one dashboard
Normalized burn - Consistent monthly or quarterly payments make it easier to predict your burn rate month-to-month
Improved cashflow - Smaller, recurring payments allow you to preserve cashflow and use your cash on hand for the objective that matters most: growth
Money saved - You can agree to those big discounts for paying upfront without the worry of shortening your runway

The Secret to Sustainable Growth: A Purchasing Strategy + Software Financing

Acquiring the best technology at the best price requires both a strong strategy and the correct payment terms. Although a bottom-up approach to purchasing new tech helps teams move quickly, it often creates more challenges and costs a company more as it grows.

Collaborating across teams and setting a SaaS purchasing framework prepares you for making the best decisions. Leveraging a software financing platform like Gynger supports you in negotiating the best deals while bringing balance to your finances.

Whether your SaaS strategy has led you to an annual contract point-solution for your team of one or a multi-product, multi-year contract for multiple departments, you can sign up with Gynger to start saving money and accelerate your company’s growth.