A CFO’s Guide to Minimizing Risk with SaaS

SaaS products are popping up like weeds. Have you noticed it? But why so fast?
At a meta level, this article from Zuora & MGI Research gives a few hints about the rise of the SaaS subscription economy – estimated to be a $100 Billion global market by 2020. From a practical level, sales teams have found great success selling directly to end users and team leaders themselves. They convince rookie buyers just how easy it is to sign-up, sign-in and get going.

The problem is that many less experienced buyers overlook (or just plain ignore) critical risk factors that can seriously affect any business. We’re talking about things like data security issues, contractual/billing terms, and duplicate purchasing.

These risk factors are forcing CFOs to seriously reconsider their policies on:

  • how budget holders can spend their budget for SaaS subscriptions
  • how cost is allocated for cross-departmental products
  • how to get the best deal on SaaS both initially and at the renewal

Here are five ways a CFO can empower SaaS buyers while minimizing risk:

Create a SaaS asset map: If you don’t yet have a list of your software products and/or vendors, now is a great time to have someone on your team compile a list. This will help you understand who owns which product and how to coach them on renewals, negotiations, and to avoid duplicate purchases of the same or similar products.

Re-articulate (or possibly re-design) your buying process: Is there a well-defined process for spending budget? Does everyone know what their signing-authority is before they go to executive sponsors for approval? Are there requirements for getting multiple bids/proposals for different vendors? If everything is a “case-by-case” basis, it makes it hard for software buyers to know what they need before moving forward with a SaaS vendor. Re-articulate your commitment to investing in SaaS to drive business performance, but provide some guidelines to reel-in the “wild west” purchasing that creates difficult conversations later on.

Itemize financial risk factors: What are the billing payment terms, cancellation terms, renewal terms, usage or scope terms that might cause unexpected price increases or fees? You might work with your accounts payable lead on these questions (because they deal with the pain of paying so many software vendors). Don’t throw the whole accounting book at your managers or department heads. Create a short list that’s easy to grasp and helps guide them through negotiations.

Itemize data security and IT risk: Consult with your head of IT to compile a short list of questions software buyers can ask vendors about data security, for on-premise solutions and cloud solutions. For larger, higher-use applications, you might even require software buyers to get IT approval before agreeing to a timeline so any integration or implementation requirements needed for success are made known.

Make it efficient: Combining reasonable safety measures with a speedy purchase is always a challenge. Consider using products like VendorHawk to improve collaboration between stakeholders and make the process as easy as possible. You may even find features that help buyers remember renewals so buyers actually prepare for negotiations instead of just winging it.

In 2016, the reality is this: Cloud-based, recurring software subscriptions are here to stay. In partnership with IT, CFOs carry the onus to provide the processes for faster adoption, less risky terms and greater collaboration for their organization to leverage these new technologies that drive the business forward. For more reading on the topic, check out this great article by David Rosenbaum at CFO maganize called “Why CFOs Should Police SaaS Deals”.

If you’re not confident in your current process or want outside perspective on what other companies are doing, set-up a meeting today to find out how VendorHawk can help.