SaaS Vendor Selection/Implementation Tips: Avoid Having the Cloud Pulled Over Your Eyes (Part 3)

This column is jointly authored by Spend Matters' Jason Busch and Deloitte's Brian Umbenhauer. Brian is a Principal at Deloitte, with extensive procurement and supply chain experience in a combination of strategy, operations and technology areas.

In the final post in this series (See the previous posts: Part 1 and Part 2), we'll focus on leaving you with yet a few more pieces of advice to make sure you're fully prepared from a total cost and deployment perspective when evaluating potential SaaS solutions for your procurement organizations. Let's begin by digging right into the issue of scalability -- not necessarily of solution, mind you (which we often take for granted today), but the scalability of the underlying contract. It's important to make sure in contract negotiations that you're not leaving yourself open to being penalized for the number of users, overall spend, number of transactions and mix of direct/indirect/services categories within a P2P, eProcurement, invoicing, spend analysis, sourcing or contact management environment. Recently, we've seen an increase in "teaser" pricing based on limited seats and features, but when an organization decides to use the application for what they originally intended, the price increases dramatically. The bottom line: make sure you leave room in your contract for growth -- your growth, not exorbitant vendor margin growth at your expense.

It's also important to make sure that you're covered from an M&A perspective as well, thinking ahead to potential contingencies if your organization is acquired. This includes ensuring that you maintain the ability to allow the new organization to use the existing SaaS environment within the negotiated and contracted pricing structure (and only if they use the solution -- negotiating flexible termination clauses, with or without penalty, upon change of control is something that should be on the SaaS/cloud table). In addition, you should also work to ensure when contracting with SaaS/cloud providers that if your business is acquired or divested, that the organization or new organization maintains the ability to transfer the overall agreement, seats, etc. without a penalty, merging it into an existing agreement or creating a new one (that takes advantage of the most attractive pricing based on previously negotiated agreements, volume discounts, etc.).

It's also essential to think through the universe of potential provider offerings to consider as early as possible in the SaaS evaluation process. Indeed, the sector is changing at a faster rate than even pundits, consultants and analysts can keep up with. For this reason, spend the extra time on your shortlist creation to guarantee that you're not giving yourself short shrift by failing to invite all of the potential right players that can provide viable alternatives and options to the big name players. Many new providers have become viable options, even when it comes to supporting large, complex organizations (e.g., Coupa at McDonalds). It's our experience that the more qualified suppliers introduced into the process, the greater the likelihood of negotiating the best possible SaaS deal as well (it's not uncommon to see 25%, 30% or even greater price reduction from large name vendors off of their "best and final" price prior to significant competition).

When it comes to negotiation, requirements definition is essential, and should come as early in the process as possible. Make sure you can ensure a thorough understanding not only of your requirements, but technology provider gaps -- including deal-breakers versus nice-to-haves. The nice-to-have but not essential features are great levers that you can hold in your negotiation arsenal to pull at the appropriate time. Think too about the sustainability of the deployment based on both contracted and soft handholding and overall support. This can help ensure a true stick and successful deployment -- or create a bunch of cloudy shelf-ware under the wrong conditions. Make sure your potential SaaS vendors (or your organization) creates/supports a center of excellence (COE) that goes beyond answering basic Level 1 to Level 3 support questions, but that is willing and capable of explaining and teaching the pragmatic ins and outs of how to get the most from all of the functionality in the toolset.

Last, on the subject of demonstrations, which has been a common subject of late on Spend Matters (How Much Can Demonstrations Teach You About a Solution? Part 1, Part 2, and Part 3), we'd add that it's essential to ensure that you write a detailed script prior to any potential demonstration that includes what some may consider "odd-ball" requests. If it's important to your company, mark it down, and ask to see it. Another demo tip: provide a short response window to see how quickly the vendor can move and how easily the tool can be configured. Then, quickly follow-up on all items that the vendor claims "we can do" but were not shown in the demonstration to make sure their capability is acceptable to you. Don't ever fall for the line "we can do that" without seeing it with your own eyes or at least finding proof of the capability.

It would be an ideal world if we could all hold hands and dance in the clouds, knowing full well that every SaaS vendor offering could meet our needs, was transparent with pricing and capabilities and could grow with our organizational requirements. But if anything, SaaS and the cloud have created greater challenge and risk in complicated and/or transaction-focused deployments than anything else. Doing your homework first can go a long way to eliminating any potential headaches you might get at 35,000 feet down the line.

Spend Matters would like to thank Deloitte's Brian Umbenhauer for his contribution to this series.

Jason Busch (and Brian Umbenhauer)

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