AI is becoming a powerful disruptive technology in recent years. One poll showed that 86% of CEOs feel that AI is a mainstream technology that their companies heavily depend on.
According to a recent report by SaaS purchasing platform Vertice, 90% of buyers are overpaying for their SaaS, by an average of 20-30%. Many of these buyers are enamored with the idea of using AI to improve their business models, but don’t make sure that they are getting the right value from it. And with these tools responsible for so many indispensable business operations, this figure should be ringing alarm bells for companies of all sizes.
But why is this happening, and what can you do about it? Let’s unpack why your business might be overspending on its software subscriptions. The guidelines below will make it easier to get the most value from AI-driven SAAS services.
SaaS demand is growing in response to the proliferation of AI
Businesses need SaaS, since it is one of the easiest ways for them to leverage the power of AI. From human resources to customer relations to in-house comms, digital tools take the pressure off of members of staff by automating vital business functions and streamlining collaboration efforts.
But now that the average company is utilizing 110 different AI-driven SaaS tools each year, the sellers providing these services are responding to demand and hiking their prices. In fact, FastSpring estimates that 37% of vendors increased what they were charging between Q1 2021 and Q1 2022, driving up software costs for the average customer.
The problem of pricing visibility for SAAS companies offering artificial intelligence services
Software developers face a number of challenges when creating AI software businesses. One of their biggest struggles is finding a good price.
Rising prices make it more important than ever for AI software buyers to track down the best value plans for their organization. However, the main challenge that company IT, finance and procurement teams face when purchasing SaaS is the lack of pricing transparency. When shopping around and attempting to compare prices between different products, you may find that the vendors you’ve shortlisted haven’t made their pricing options publicly available. This makes it difficult for companies to compare the value of different AI applications.
While some choose to publish list prices online through their websites or third-party publications, many companies intentionally hide their price points — in fact, OpenView reports that as many as 55% of vendors choose to obscure. But why does this happen?
Usually, it’s because vendors are looking for prospective customers to reach out and get in touch with their sales teams to find out pricing information. This works to their advantage — once they learn about your needs, providers can give quotes for a tailored plan that might come in costing a little higher than a standardized price that you were looking to pay. And next thing you know, you’ll be on their books and moving through the sales process.
From the customer side of the deal, this makes it difficult to compare between vendor prices and get the best deal for the business. When vendors obscure their price points, buyers are unable to see what other organizations are paying for their SaaS, so lack the insight to effectively negotiate with leverage.
So, once this is all said and done, SaaS buyers will often find themselves overpaying for SaaS — even if they don’t realize that they are doing so.
Strategies for saving money on SaaS
There are a lot of benefits and risks of using artificial intelligence. AI technology can be very valuable, but it can also be very expensive. You have to make sure investing it doesn’t blow a hole in your budget. If you’re not cutting costs where you can and keeping your SaaS spend to a minimum, it could quickly spiral out of control. Between inflation, hidden contract clauses, and expensive upgrades, you’re likely to find your software costs growing year-on-year. But it doesn’t have to be this way — here are some top tips for saving money on your SaaS.
1. Cut out redundant applications
Because companies now have so many tools in their SaaS stack, it can be hard to keep track of which applications are providing the most business value. As a result, you might find that you’re paying for apps that are going unused, or that the company is using multiple tools for the same purpose.
This is where application rationalization can help. Application rationalization is the process of assessing the entire SaaS stack in use across an organization, to determine which contracts can be terminated, which need to be downgraded, and which should be retained. To get started, look into the associated usage patterns for each tool and the return on investment that you’re getting from your subscription, then make informed decisions about which should stay and which should go.
2. Negotiate your contracts
Once you’ve entered into talks with a vendor, it’s up to your company’s negotiation team to procure the best value contract. The price you’re quoted isn’t always the price you’ll end up paying — so make sure you send your most experienced, best-informed negotiators to handle discussions, equipped with market insight into the price points offered to other customers.
Consider negotiating contract terms that will reduce your spending down the line, such as the removal of clauses that could see your contract automatically renewed at a higher price than originally agreed. You can also negotiate for discounts in exchange for certain terms, for example if you choose to subscribe to upfront billing or a multi-year commitment.
Once you’ve cut down your existing contract outgoings and streamlined the procurement process for new subscriptions, you’ll be getting better value on your plans— and no longer overpaying for your organization’s SaaS.
Get the Right Price When Investing in AI SAAS Tools
SAAS technology is very popular in 2022. Fortune Business Insights shows that the market is growing by over 27% a year. However, there are a lot of nuances that you have to understand. One of the most important things that you need to do is make sure that you pay the right price for AI-driven SAAS tools. The guidelines above should help.
