The numbers might surprise you – the average company uses 112 SaaS vendor management applications in 2023. Your employees switch between 11 different applications every day, while your business could be losing money on duplicate or unused software.
Smart companies that focus on strategic software vendor evaluation see amazing results. To name just one example, Extensiv saved $133K after completing just 37 deals, while Orum cut costs by $160K across 59 deals. Getting these savings isn’t just about finding the cheapest SaaS vendors – you need a systematic vendor evaluation process.
Missing a proper SaaS evaluation checklist puts more than money at risk. Security vulnerabilities, compliance issues, and integration problems can affect your customer service. Bad vendor relationships often lead to surprise price hikes and support problems later.
Here’s the bright side. A well-laid-out vendor evaluation framework helps you cut unnecessary costs, reduce data risks, and improve your technology ecosystem by a lot. Better customer service and simplified processes follow – vital factors to help your business survive and grow.
This piece shows you proven strategies to pick the right SaaS partners that line up with your business needs and protect your budget. Let’s explore how you can revolutionize your SaaS vendor management system from a cost center into a strategic advantage.
Define Your Business Needs First
You’ll find the right SaaS solution by defining your business needs before looking at vendors. The SaaS market keeps growing faster, with revenue expected to grow 22.2% to reach USD 73.60 billion this year. The selection process should start with a clear picture of what your organization just needs, given the many options out there.
Estimate user count and usage levels
The right number of users and their usage patterns will make your SaaS implementation successful. Start by counting your current users and mapping out future growth. This step is vital since most SaaS applications base their charges on seat count or usage levels.
Figure out which departments will use the software and how often they’ll need it. SaaS applications should handle thousands of users working at the same time. Usage spikes from seasonal changes or project deadlines can make a big difference in some months.
Your budget and service tier choice will depend on these usage estimates. A clear understanding of usage patterns helps avoid overpaying for extra capacity or running into performance issues from underestimating your needs.
List must-have features and integrations
Your business’s core needs should guide your feature list. Think about the problems you want to solve instead of getting caught up in fancy features.
Here are the most important features to look for in SaaS solutions:
- Scalability: Your application should grow alongside your business without major changes
- Security capabilities: Data protection through encrypted storage and strong role-based access controls
- Integration options: The system should work well with your existing tools
- Configurability: Look for systems that match your business processes
- Automated provisioning: Your users should get access to applications right away
The system’s ability to connect with other tools needs extra attention. Map out all the systems your new solution should work with. The best SaaS products can connect with many third-party tools, which makes them more useful.
Set a realistic budget range
Look at your current software spending to set a budget that fits your goals. This review often shows where you’re paying twice for similar tools—some departments might use different solutions for the same tasks.
Your budget should include more than just the subscription cost. Add up the Total Cost of Ownership (TCO), which covers setup costs like moving data, initial setup, training users, subscription fees, and ongoing expenses for maintenance and support.
Think about how costs might change as you grow. Most SaaS vendors charge more as you add users or features. Plan for cost changes based on your expected growth over the next few years.
A clear budget helps you negotiate better with vendors. It also helps you decide which features are worth the money versus nice-to-have extras that might cost too much.
Shortlist Vendors Based on Key Criteria
Your business requirements are set, and now you need to screen potential SaaS vendors systematically. The market offers countless options, so a systematic vendor evaluation process will give you partners who deliver lasting value instead of future problems.
Check functionality and usability
First impressions count, especially with SaaS products. A solution packed with powerful features but poor usability often results in low adoption rates and wasted money. The best platforms come with easy-to-use interfaces that reduce training time and optimize productivity.
Your assessment of functionality should look past flashy features to get into how the software works in real conditions. Note that trailblazing functionality often comes from newer, less established players in the SaaS market. As one industry expert notes, “Temper excitement around features and functions with an honest assessment of the company’s maturity and knowing how to support your organization in the long run”.
Your evaluation should include:
- Core functionality validation – Essential features should work flawlessly and deliver intended value
- User workflow testing – Potential roadblocks might disrupt task completion
- Cross-platform consistency – Applications should perform consistently across devices and screen sizes
- Error handling quality – Error messages must be clear and helpful to guide users toward solutions
Usability testing plays a crucial role in your software vendor evaluation. Early testing helps you stay on track and prevents major changes down the line.
Review integration capabilities
The most powerful SaaS solution becomes a liability if it fails to work with your existing systems. Integration capabilities are the life-blood of your SaaS evaluation checklist.
“Rarely do our applications exist in silos,” notes one technology expert, “and as soon as your new SaaS tools gain traction there will be just need to combine their data and functionality into other applications and reports”. Your potential vendor should offer robust APIs that combine smoothly with your existing software.
The vendor’s integration options should support two-way data flow rather than simple “handshake” connections. You should ask specific questions about API documentation, deprecation strategies, and their use of open standards to prevent vendor lock-in.
Modern integration approaches like middleware that aid smoother collaboration between systems deserve attention. These approaches optimize network performance and lower operational risks over time.
Review customer support options
Support quality can determine your SaaS success, yet many overlook it during evaluation. A detailed vendor evaluation framework should provide a full picture of support capabilities.
“Every vendor has ‘world-class’ support during the sales process, but the story can suddenly change once you become a paying customer,” warns an industry expert. You can avoid this bait-and-switch by creating a trial account without your company’s name and submitting a support request to test response quality.
Large SaaS deployments need a detailed support model. Your help desk might handle initial support, or users could contact the provider directly. Your internal team’s communication with the vendor’s support staff matters too.
The vendor should offer multiple contact channels, including phone, email, and live chat. Their Service Level Agreements (SLAs) should specify response times based on issue severity. Top providers deliver 24/7 support with experienced technical staff who solve problems quickly.
AI-powered support tools like chatbots show a forward-thinking vendor who values efficiency. These tools handle common questions automatically, which helps users solve issues quickly while human agents tackle complex problems.
Use a Structured Vendor Evaluation Process
You need a structured process to assess saas vendors once you have a shortlist. The right approach helps you avoid making pricey mistakes and pick a partner that meets your needs today and tomorrow.
Request demos and free trials
Product demonstrations and free trials with shortlisted vendors are a great way to get insights beyond marketing materials. Free trials give you a chance to explore the software at your own pace without sales pressure. Demos let you see features through a guided tour.
Your demo and trial sessions should:
- Request customized demos that focus on your specific workflows instead of generic presentations
- Get key stakeholders from different departments to join the assessment
- Test real-life scenarios that match your daily operations
- Write down your impressions right after each demo or trial session
“Using an intentional, systemized process to evaluate SaaS vendors will help you effectively and accurately compare competing products”. Demos show capability, while free trials let you check usability yourself.
Use a SaaS evaluation checklist
A detailed evaluation checklist helps you assess all vendors with the same criteria. You should create a scoring system (typically 1-5) to compare options objectively. Your checklist must cover:
- Security certifications and compliance standards
- Integration capabilities with existing systems
- Service level agreements (SLAs) for uptime and performance
- Support options and response times
- User experience and interface quality
- Vendor’s stability and financial viability
Score each vendor against these criteria to ensure fair comparisons. This method prevents emotional decisions and helps you spot critical issues that could cause problems later.
Compare pricing models and hidden fees
Simple-looking prices often hide much of the actual costs. Look beyond subscription fees and break down potential hidden expenses like:
- Implementation and onboarding assistance
- Customization and integration development
- Data migration from legacy systems
- Additional features or upgrades not included in base pricing
- Compliance assistance for regulations like GDPR or HIPAA
The total cost of ownership should include all related expenses. Compare this complete figure across vendors rather than just base subscription rates.
Assess vendor scalability and roadmap
The vendor’s ability to grow with your business matters greatly. Good vendors share their product roadmap openly and show their commitment to improvement.
You should ask about:
- Annual investment in product improvements
- Their roadmap matches your future needs
- Financial stability and profitability
- Feature releases and updates frequency
The vendor’s long-term vision shows if they solve today’s problems or build tomorrow’s solutions. Check any publicly traded vendor’s latest financial reports to confirm stability before making your final choice.
Compare and Score Vendors Objectively
You’ve gathered information about potential vendors. The next step is to compare them using objective criteria. Organizations that use standardized evaluation methods pick better solutions and avoid making pricey mistakes in their saas vendor management process.
Create a vendor comparison table
Comparison tables unite key features and benefits in a single, easy-to-read format. They turn complex vendor information into digestible, comparable data points. Studies show that 57% of successful comparison landing pages use side-by-side feature tables.
A good vendor comparison table needs:
- Essential features in rows (security, integration, support options)
- Vendors in columns to compare side-by-side
- A simple 1-5 scoring scale to spot outliers
- Consistent criteria for all vendors
Building detailed comparison tables takes time and effort. Many organizations find value in getting specialized help. Need help building objective vendor comparisons? Numosaic’s saas vendor selection services can streamline this process and ensure you capture all critical evaluation criteria.
Score vendors on security and compliance
Security scoring needs special focus in your vendor evaluation framework. You should rate vendors based on their compliance with standards like SOC2, GDPR, HIPAA, and ISO27001.
Each security criterion needs both a grade (typically 1-5) and a weight that shows its importance to your organization. The formula to calculate weighted scores is simple:
Vendor’s Grade × Urgency = Weighted Score
This method gives critical security factors the right influence in your final decision. Document each vendor’s security posture in areas that matter most to your business – data storage location, attack prevention measures, and certification history.
Involve stakeholders in final decision
The best software vendor evaluation processes need input from multiple departments. Mutually beneficial collaboration with the core team leads to better-structured management and boosted decisions.
You need representatives from:
- IT teams who know technical requirements
- Finance who track expenses and ROI
- Procurement specialists who negotiate contracts
- Legal teams that check compliance risks
- End-users who will use the software daily
Good collaboration helps your organization spot potential risks early and fix them quickly. Note that stakeholder feedback should come through surveys or structured discussions to improve your vendor selection.
Negotiate Contracts and Plan for the Future
Your next priority after choosing your ideal SaaS partner is to protect your organization through proper contract negotiation. Smart contract terms will save you money and protect your business from future complications.
Understand SLAs and support terms
Service Level Agreements (SLAs) outline what quality and reliability your vendor promises to deliver. You should focus on uptime guarantees and ask for at least 99.5% uptime if a vendor starts with 99.0%. Set clear performance metrics for response times and system availability. Make sure you include specific remedies if vendors don’t comply.
Set up a tiered system of remedies for missed service levels. You could request a 5% service credit for uptime between 99.5% and 99.9%, which increases to 10% for uptime between 99.0% and 99.5%. The contract should give you the right to terminate if uptime stays below an acceptable threshold for too long.
Check for vendor lock-in risks
Vendor lock-in happens when you depend on a provider that no longer meets your business needs. This can happen due to high migration costs, tech limitations, or strict contract terms.
Here’s how to avoid lock-in:
- Add clear exit clauses that help you switch suppliers easily
- Get flexible contract terms to keep your operations agile
- Check your vendor’s performance, reliability, and financial health regularly
- Read the termination policies in the fine print carefully
Many companies find out too late that switching vendors costs too much or disrupts their business. You need to examine all terms before signing the contract.
Plan for data portability and exit strategy
Data portability isn’t optional—you need it for long-term flexibility. Ask if you can get your data in standard formats like CSV, JSON, or XML to make migration easier.
Your contract should spell out data ownership and retrieval rights clearly. Look for any hidden costs tied to data extraction—watch out for surprise fees during data retrieval. A simple question to ask is “Can we take our data with us if we leave?” This gets to the heart of data portability.
Conclusion
Your business technology strategy depends heavily on choosing the right SaaS vendor. This piece shows you a complete approach that turns vendor selection from guesswork into science.
Clear business requirements form the foundation of successful SaaS partnerships. Without them, you might invest in solutions that don’t deal very well with your actual needs. A structured evaluation process with objective scoring criteria helps you pick vendors based on capability rather than charisma.
Your selection process must focus equally on contract negotiation. Companies often look at features and pricing but miss crucial terms affecting future flexibility. They end up trapped in unfavorable agreements with limited ways to exit.
Data portability remains vital to your future security. Your business information is a valuable asset that should stay available whatever your vendor relationships. Getting the right extraction rights protects you from potential risks with vendors later.
Numosaic’s SaaS vendor selection services can help you navigate the complex digital world and streamline your evaluation process to find the perfect match for your needs.
FAQs
Q1. What are the key factors to consider when choosing a SaaS vendor?
When selecting a SaaS vendor, focus on defining your business needs, evaluating functionality and usability, checking integration capabilities, assessing security measures, and reviewing customer support options. Also, consider the vendor’s scalability and long-term roadmap to ensure they can grow with your business.
Q2. How can I avoid hidden costs when selecting a SaaS solution?
To avoid hidden costs, thoroughly compare pricing models and look beyond base subscription fees. Consider expenses such as implementation, customization, data migration, and potential upgrades. Calculate the total cost of ownership by factoring in all associated expenses over time, not just the initial quoted price.
Q3. What steps should I take to prevent vendor lock-in?
To prevent vendor lock-in, negotiate clear exit clauses in your contract, ensure data portability, and maintain operational flexibility. Regularly assess the vendor’s performance and have a well-defined exit strategy. Ask about data extraction processes and associated costs before signing any agreements.
Q4. How important are Service Level Agreements (SLAs) in SaaS contracts?
SLAs are crucial in SaaS contracts as they define the quality and reliability of service you can expect. Focus on uptime guarantees, aiming for at least 99.5%. Establish clear performance metrics for response times and system availability, and negotiate specific remedies for non-compliance to protect your business interests.
Q5. What role should stakeholders play in the SaaS vendor selection process?
Involving stakeholders from various departments is essential in the SaaS vendor selection process. Include representatives from IT, finance, procurement, legal, and end-users to gather diverse perspectives. This collaborative approach helps identify potential risks early, refines the selection criteria, and ensures the chosen solution meets the needs of all relevant parties in your organization.
