Gartner Research

SaaS Payment Terms and Profiles Play a Major Part in Deal Success; Negotiate Early

Published: 23 May 2017

ID: G00317992

Analyst(s): Dawn Hubbard , Jo Liversidge

Summary

Sourcing and vendor management leaders negotiating SaaS contracts often assume that terms related to payments are non-negotiable. Achieve savings, a better deal structure and quicker closure by including specific requirements for payment terms, holidays or profiles early in the buying cycle.

Table Of Contents
  • Key Challenges

Introduction

Analysis

  • Negotiate an Appropriate Free or Reduced Charge Period ("Payment Holiday") in Any Significant SaaS Purchase Where the Implementation Schedule Is Estimated to Be Longer Than Six Months, Ideally Linked to Anticipated Implementation Dates
  • Emphasize Payment Holiday Requirements in Any RFx for Complex SaaS Engagements Likely to Take Six Months or More to Implement
  • Pursue All Payment Options With SaaS Vendors — Such As Monthly or Quarterly Payments and Some Form of Consumption-Based Pricing — If You Expect Nonlinear Demand to Ensure Costs Mirror Demand
  • Include Payment Terms of 45 days or More in Your Negotiation
  • Negotiate a 3% to 5% Maximum Renewal Price Uplift Cap in All SaaS Contracts, Applied on Any Multiyear Renewal, for the Whole Term and Not Annually

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