The correct process for buying SaaS
Step 1. Four nods of approval policy
When you create the SaaS purchase process from scratch, you need to establish a policy of 4 approvals from each of the responsible departments. This way the stakeholder will know exactly who to contact in the event of license purchase or renewal.
These 4 approvals should be documented and stored in one place, e.g. on the company intranet.
1. Department Heads
Each team should have a person in charge at the department head level. This includes the head of marketing, sales, etc.
No purchase should be made without the approval of the appropriate department head.
Before making a purchase, the stakeholder must check with the appropriate person whether the company has the funds to do so. You should appoint a responsible person to oversee and approve such requests.
This is usually the VP of finance for companies with up to 250 employees, FP&A for 250+, and procurement for larger companies.
Buying a new SaaS solution should not jeopardize the security of your company. Moreover, you have to make sure it is compliant (i.e. SOC 2 compliance, SSO requirements, etc). You need a dedicated person to check the potential software for compliance.
Talk to your IT/security/DevOps team and they’ll tell you who is best suited for this role. Typically the Head of Information Security will do.
The final step is to approve the purchase of the SaaS tool from a legal standpoint, drafting and approving contracts. This can be done either by an in-house lawyer or by an outside specialist hired by your firm.
Keep in mind that this step usually takes the longest amount of time. The stakeholder should be aware of this.
Step 2: Determine timing and cost implications
A good buying process means a set of clearly defined sequential steps for both the immediate purchase of a SaaS tool and for renewals. If the process is clearly outlined in internal documents, it will save all parties involved time and money in negotiations. We recommend structuring it as follows:
1. The responsible SaaS manager should begin negotiations and initiate the process 90-120 days before the purchase. This is especially true in the case of auto-renewals.
2. Understand the time and financial implications in the event of a vendor change. The stakeholder should contact the supplier representative and let him or her know that the company is considering a contract extension and evaluating the potential benefits of this decision.
Note the wording. There should be a special emphasis on “evaluating.” This will let the supplier know that you aren’t only considering their product, but that you are going to take their offer to the market to get competing offers. This is a very important step because SaaS companies are interested in getting more and more money from you over time.
Step 3: Stakeholders should evaluate the SaaS tool before asking for a budget
Finance managers should ask stakeholders what alternatives are available to the solution being asked for and how much do they cost. In turn, at least three SaaS tools should be named, the benefits of each, and the ratio of potential revenues from implementation to costs.
The most common approach is “three offers and a buy”. This means getting at least three offers from competing vendors and making a decision based on that data.
Regardless of your personal preferences or team advice, you need to make it clear to the vendor representatives that you have options to choose from.
Step 4: Set spending thresholds
You need to set spending limits. Going beyond them should imply approval with additional individuals. Here you need to use common sense and let people make purchases that will allow them to do their jobs quickly and well, but at the same time will not drive your firm to ruin.
For example, you can instruct the vice presidents of finance to approve expenditures under $100,000, and only allow spending beyond that line with the personal approval of the CFO.
Get all the approvers together in one email or Slack thread before you directly sign off on the purchase decision. This is to speed up the decision-making process as much as possible.