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Breathing with the volumes
SaaS licenses are usually marketed so as to allow you to increase or decrease the number of licenses on a monthly basis, allowing you to perfectly follow the trend of your volumes. Especially in volatile contexts, this is requested by the budget owners. The selling (or purchasing) argument that is made is that of the adaptability of costs against the need.
Higher traffic or demand volumes can be solved with temporary augmentation of licenses, whereas a decrease in volumes can be met with a decrease in number of licenses purchased. That sounds like the perfect solution for almost any organization. After all, most organizations are anticipating decline, growth, or even a seasonal pattern, not to mention a combination of a seasonal pattern and decline or growth.
But then the reality of purchasing and budgeting in an enterprise environment kicks in:
Both these issues lead to a fixed pricing of the SaaS licenses combined with a fixed number of licenses …
… and gone is the premise of breathing with the volumes.
One way this is sometimes addressed by SaaS vendors is to allow you to buy a pool of licenses that you can consume as needed. That provides an alibi for procurement and the purchasing manager, but in real life this has nothing to do with the initial idea of SaaS licenses. After all, when your estimation of licenses needed is off you either bought too much and paid too much (even after procurement did their job) or you need to procure additional licenses which creates a budget overrun.
Another way in which SaaS vendors try to contain the costs is by setting a ceiling on the number of licenses/units (or $). This should ease their anxiety for unlimited spending due to a success of the implementation. However, in real life and when initially well estimated, an increase of licenses usually goes hand in hand with an increase in sales volumes or an increase in customer satisfaction. This can be compared with the range anxiety people show when first driving an electric car after driving a gas-powered car for decades. After a while, when they have changed their attitude and approach, they find that there is nothing to worry about. This applies to cloud licenses as well: Once you start working with them you find out how to manage them.
On top of that, if your number of licenses increases because you are more successful and you have, for example, more customer interactions, how bad is that?
Even in very strict budget regimes there should be an opportunity to point out that the increase of license costs is outweighed by a success metric (e.g., the increase in revenue or customer satisfaction).
So, how should you avoid the SaaS usage cost contradiction?
Do not treat SaaS licenses as they are on-premises costs than have to be estimated and validated upfront.
When it comes to SaaS licenses there are four steps:
Use professionals to help you out if needed for estimation of volumes, education of your finances department and to support you in getting the right deal when entering in negotiations with a software vendor.
I see many companies struggle with the SaaS usage cost contradiction. Applying the four steps above will help you avoid that struggle. I would be happy to help you getting started by discussing what your specific issue is. Feel free to reach out to me via email@example.com or connect via Linkedin.
I know what drives you because I was you.I am a somewhat a-typical architect, because through my education and the first 18 years of my working life I was a marketeer. This means that I have struggled with the same issues you are struggling. I always remember my own reaction to the ‘IT’ questions I am asking you nowadays like “what do you exactly mean with I want my channels connected?” or “but what do you really want to achieve with this tool?”. As a senior Digital Architect I help organizations in their struggle to transform and to become more digitally mature. I cover the entire Customer Experience domain and I’m not connected to a specific vendor. This allows me to advise you on the next steps you should take without bias. I bridge the gap between Business and IT and I help you organize your road-map in an efficient way. With a lot of expertise in retail, travel and automotive, I’m working on some engagements in the public domain as well. I am an avid windsurfer who loves to go out when others stay in, but always in a balance between family and work.
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