vm/E+/Getty ImagesZDNET’s key takeaways
- ZDNET spoke to executives on best practices for negotiating contracts with SaaS vendors.
- Have one employee lead negotiations, calculate three-year costs, and leverage quarter-end pressure.
- Discuss contract provisions to protect your legal rights and security expectations.
Once your company headcount exceeds a minimum threshold, contract negotiations become a routine part of the software onboarding process. SaaS companies frequently offer bulk pricing and customizable terms in exchange for locking in a certain number of licenses, but the value you get out of the deal depends on how well you can negotiate.
Most advice you’ll find on the subject is cookie-cutter, offering generic suggestions like “get quotes from multiple competitors” or “start negotiations ahead of time.” It’s all true, but unhelpful in real-world situations where you’re sitting across the boardroom from seasoned sales teams.
Also: ‘The SaaS apocalypse is overrated’: How Workday and other software providers plan to survive AI
So, I spoke to five leading B2B enterprise leaders on how they would advise approaching an SaaS contract negotiation. Each of them shared several advanced tips and strategies, complete with numbers, timelines, and breakdowns of specific legal clauses. Beyond negotiating for the lowest price, they offered suggestions on internal politics, contract details, data rights management, and AI training agreements.
Here are 6 key takeaways from the experts.
1. Ask the vendor about the sales process
“If we were to move forward with this, can you walk me through the steps that would need to happen?” Gonzalo Sainz-Trápaga, CRO and co-founder at InvGate, said that this is a question that all good sales professionals ask during sales calls. Giving a clear answer indicates that you’re a serious buyer who understands their procurement process, making sales teams more invested in the negotiation.
But there’s another advantage to this, Sainz-Trápaga explained: it’s an excuse to turn the question back on the vendor. Understanding their sales process can help you identify which points to press to your maximum advantage.
Also: ‘AI is an enormous tailwind for software companies’: 5 tips for adapting to the new ‘SaS’ model
Salespeople, their managers, and VPs all work on quotas, which puts pressure on them to close more deals and lends them greater flexibility. Moreover, software companies may allow their salespeople more leeway in certain areas than in others, depending on their immediate goals.
For example, an early-stage startup that needs to maintain a steady cash flow may be willing to lower licensing costs in exchange for a longer lock-in duration. But for established SaaS companies, contract length alone may not move the needle on pricing. “The larger the organization, the more salespeople are constrained by rules of engagement that they need to navigate,” added Sainz-Trápaga.
2. Go beyond list pricing, calculate your three-year cost
Mariam Hakobyan, CEO of the no-code platform Softr, said that comparing sticker prices across vendors is practically useless during contract negotiations. Instead, you should focus on the total costs incurred over a three-year engagement, factoring in your specific use case. “Model users, expected growth, usage limits, implementation, support, and likely overages,” she told ZDNET.
Hakobyan pointed to Softr’s own pricing structure as an example of how it adjusts for this. Under an annual contract, the Business tier plan costs $329 per month. This works for small- to medium-sized businesses that use Softr to build employee portals, but companies building internal apps for more than 100 users should request an Enterprise-tier quote.
“Vendors value commitment and predictable growth,” she added, noting that a vendor is much more likely to offer preferential pricing if they know where a company is headed and what kind of scalability to expect.
Also: 45% of professionals use shadow AI tools – here’s how to manage the risks
Also, while some businesses are hesitant to mention they’re negotiating with multiple vendors, Hakobyan says this is acceptable. In fact, disclosing it up front can give you more leverage with a vendor, provided you’re transparent about your decision-making process rather than simply claiming that the competition is cheaper.
“Running two vendors in parallel is standard practice, and vendors expect it,” confirmed James Hunter, CFO of AccountsIQ, a platform that helps businesses automate financial transactions and workflows. Just don’t try to manufacture false urgency based on something that isn’t real, because vendors talk to each other more often than buyers assume.
3. When a vendor blames a price hike on ‘platform investment,’ ask them to prove it
Hunter also shared an anecdote about a problem that’s becoming increasingly common lately, where a vendor doesn’t offer a clear justification for an abrupt price increase. When asked for the reason behind a sudden cost increase at renewal, Hunter’s team was told it was due to “platform investment.”
Instead of pushing back on the price hike itself, his team asked the vendor to offer specific feature commitments as material evidence of the platform investment. When they realized they would have to commit to a roadmap they would be held accountable for, the vendor chose to lower prices instead.
“Vague justifications for price rises are usually negotiable if you ask for them to be made concrete,” Hunter remarked, adding that the lesson here isn’t so much about the discount as the need for specificity when discussing contract terms.
4. Your leverage on exit terms peaks just before you sign
Of course, contract negotiations aren’t just about getting the lowest initial price. It’s just one among many things to factor in before you sign. “Relationships that last long typically don’t start stretching to the max on day one,” Sainz-Trápaga said, adding that “good deals exist in an envelope of multiple dimensions.”
Once your team has completed onboarding, uploaded its own data, and set up workflows on a platform, leaving a vendor becomes expensive, and they know this. That’s why, Hakobyan said, it’s better to judge vendor lock-in not just by contract length but by the actual cost of leaving.
Also: ‘Sophisticated’ AI swarm attacks are months away, OpenAI warns: What experts say businesses must do
She also suggested negotiating the best possible terms on implementation support, renewal pricing, and data portability before you sign the contract — not once you’re already settled into the platform. Hakobyan especially emphasized the importance of concrete data portability terms. “Agree before signing on what you can export, in what format, and what happens to your data after termination,” she advised.
Sara Wyman, CEO of Stackpack, agreed with both those suggestions: “You absolutely need to negotiate your exit rights at the beginning of the relationship, not when you’re trying to leave.” Stackpack helps companies manage their software licensing and costs, which puts them in a unique position to participate in a lot of these conversations. She also recommended that you discuss provisions for what happens when things go wrong. For example, if a mission-critical software vendor repeatedly fails its SLA, it’s more important that you have the option to terminate rather than to receive a free credit.
5. Give one person clear ownership of the negotiation
Wyman also explained how internal ambiguity at a company creates additional leverage for the vendor. When a salesperson can sense discord among decision makers, it suggests an inability to take decisive action, which sometimes gives the vendor an upper hand.
“We recommend that there is one true vendor owner,” Wyman said, sharing her advice to her own clients at Stackpack. “This person should know the offering, SLAs, vendor contact, and all points of the contract and partnership. The vendor owner also owns the negotiation and coordinates everyone else.”
When someone is given clear authority to act and the accountability that comes with it, purchase decisions are made more efficiently and with better results. However, she clarified that while there’s only one ultimate owner, there can certainly be multiple decision makers involved in the process. Department leads across operations, IT, finance, and HR can also participate in the selection and be present in negotiations, especially if they have a stake in the software being rolled out.
Building on Wyman’s advice, Hakobyan offered clear checkpoints for involving various decision-makers throughout the negotiation timeline. Assuming you kick off vendor selection at least 90 days before a renewal or new rollout, she recommended that all commercial teams align on the contract terms in principle by Day 45. After that, the contract should be sent for legal and security reviews, both of which should be completed by Day 76.
That said, legal and security leaders should not be included only at the review stage. They should be part of the conversation from Day 1, guiding commercial teams on contract terms and security provisions that need to be in the deal.
6. Negotiate data rights, especially when it comes to AI
With more and more software companies integrating AI models into their platforms, several experts emphasized that companies should seek clarity on how their data is handled. “I would not accept a general statement that a product is ‘AI-powered’ as an answer,” said Aler Rab, deputy CEO of the cloud computing platform Cloudzy, which rents out remote servers to development and engineering teams.
If a vendor adds new AI features to their platform or sends data to third-party language models via an API, Rab also advised that you ask them explicit questions about what they do with your data — how long it is retained, where it is stored, which organizations and employees have access to it, could your data be used for model training, and whether you can opt out if so.
Also: The 3 types of people who will excel in the AI agent era, according to tech leaders
But you shouldn’t limit your questions to their current data practices, because vendors can change them at any time unless suitable provisions are built in. Ask a vendor what happens if they decide to change the way they process your data with AI, with specific legal provisions built into the contract to protect your intellectual property rights.
If a vendor isn’t keen to institute these provisions, Hunter suggested referring them to industry precedent. “Ask what terms the vendor has agreed with comparable customers,” he said, adding that you can also use your license volume and contract length as leverage for instituting stronger data protections.
Hakobyan also suggested discussing the specific permissions and level of access that AI models are granted on the platform. “Does the AI inherit the same permissions as the underlying application? ‘We don’t train on your data’ isn’t enough,” she said.
More best practices to keep in mind
Every expert ZDNET spoke to agreed that negotiations should not turn into a tug-of-war between a business and its vendor. They each suggested starting the selection process early, speaking with multiple competing vendors, obtaining detailed information on their priorities, and negotiating terms that reach a compromise for both parties.
Also: The new enterprise AI expert every company needs – and why
A few more highlights from my conversations include:
- Instead of opening with a request for a discount, ask the vendor what they’re optimizing for the quarter so that you can negotiate around it.
- Quarter-end closures give salespeople greater authority to approve non-standard terms without escalating every request up the company chain. This is when they’re most likely to be flexible, as they have leftover quota to fulfill.
- Push back against stringent auto-renewal notice periods by requesting a 90-day notice instead of the standard 30 days. This is a standard ask that sales professionals can agree to without friction.
- You can use benchmarking data from G2 or Gartner to understand licensing costs for custom tiers, but treat it as a starting point for your research rather than a final answer.
- Sometimes, the best deal isn’t the lowest subscription price but an unusual advantage a vendor can offer, such as exposure to more investors or clients in the industry.
