Avoid these common misconceptions when evaluating a new SaaS (Software-as-a-Service) provider.
Misconception #1. Usage-based pricing controls costs.
Usage-based pricing models are very attractive as it gives you the ability to calculate the cost to use the software. These pricing models are usually based on either an end-user subscription or on a transaction subscription. These pricing models focus you on how your company will use the product.
When determining the pricing model that will work best for your company, it is important to keep in mind, usage-based pricing doesn’t necessarily control your costs. For example, if an end-user won’t use the product often enough to learn it, there may be additional charges for customer support. Improper user administration combined with a high turn-over rate, puts you at increased risk for being charged for non-active users. Transaction-based pricing is beneficial to companies with casual software users, however these companies should consider that charges may apply for incomplete transactions or may be charged for the same transaction multiple times, as it gets approved or declined throughout the business process.
Some service providers increase software licensing cost after the initial term. Reduced usage is often met by increased pricing. Service providers that take this approach have an undesirable reputation with procurement professionals for their pricing tactics. For this reason, it is important to discuss pricing when evaluating references of a new software provider.
Misconception #2. Market leaders provide the best functionality.
The company that has the largest share of the market doesn’t necessarily provide the best product functionality. A market leader may simply have been first to market and have the biggest budget. Being first to market is important in a growing market, but in a mature market wherein the product is considered commoditized, the market leader may have the capital to buy functionality in lieu of delivering innovation. Products that have been developed through acquisition, rather than through native development, can be cumbersome to use and may result in higher over-head through IT support and complex implementation. You may also be paying for outdated functionality now considered obsolete.
Misconception #3. Implementation risks are best mitigated by bigger service providers.
Implementing new software for a global corporation is not without risk, and the bigger the organization, the bigger the risk.
It is common to assume that larger software providers are better suited for large implementations because of the available manpower and budget. However, large companies cannot be as agile as smaller companies. Larger companies are likely to have weighty processes and procedures, approval delays, and inflexible business policies. If implementation needs to move against the norm, sometimes big just gets in the way and you may want to consider a more flexible partner.
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