The role of BATNA in SaaS procurement (with examples)

What is BATNA in negotiations?

BATNA refers to a negotiator’s ‘Best Alternative to a Negotiated Agreement’. In the context of software negotiations, a BATNA is essentially your backup option should negotiations with your chosen vendor fail — for example, if they won’t offer a low enough recurring fee or remove a clause you’re dissatisfied with.

Put simply, this is your best other choice if you and your vendor can’t come to an agreement.

It’s vital to understand your BATNA inside and out so you can compare it to any proposal you are offered during the negotiations process. This will help provide a reference point for assessing the value of the contract or terms you’re offered.

For example, if the proposal your vendor offers is more favorable than your BATNA, you might wish to take the deal. On the other hand, if it’s worse, it might be in the best interest of your organization to walk away and pursue another course of action.

How to leverage BATNA in SaaS negotiations

Leveraging BATNA is a strategic approach that will significantly impact the outcome of your procurement process. Typically, this involves using your knowledge of viable alternatives to strengthen your negotiating position and achieve more favorable terms with your chosen vendor.

It’s these strategies that will help prevent your organization from overspending on SaaS like the 90% of businesses that are currently overpaying for their software.

Let’s take a look at some examples of how to effectively leverage BATNA in your SaaS negotiations.

Conduct your due diligence on vendors

Firstly, you’ll need to develop a thorough understanding of your options should negotiations with your desired vendor fall through. Identify alternative SaaS providers, solutions, or negotiation tactics that could be pursued if an agreement cannot be reached.

As part of this process, you should evaluate the strengths and weaknesses of your alternative providers, considering factors such as cost, functionality, and implementation timelines. At this stage, it’s vital to assess a breadth of contract terms to ensure you’re getting the best deal.

For instance, even if the standard pricing of an alternative vendor is lower, it may be subject to price uplifts or a reduced capacity for discounting. This knowledge will empower you to enter discussions with a clear reference point and assess any proposed deal in comparison to your viable alternatives.

Assess the long-term value of your options

You should also consider the suitability of your alternatives in the broader context of the SaaS ecosystem. Engage in industry research and network with peers for insights into prevailing market trends and emerging technologies. This information will aid your understanding of what constitutes a competitive BATNA and inform your negotiation strategy.

As an example, many vendors are now incorporating AI into their product offerings, or planning to do so. Our data shows that AI software has had an increase in share of spending by 500% since the start of 2023.

Collaborating with industry experts or consultants who specialize in SaaS can shed light on which tools are likely to make the best long-term investments and which could soon be obsolete.

Plus, you’ll quickly learn about best practices and potential pitfalls in procurement, strengthening your position at the negotiation table. Leveraging BATNA in your SaaS negotiations is not a one-time exercise — but an ongoing process that requires continuous assessment and a comprehensive understanding of the industry landscape.

Participate in an open dialogue with your vendor

Effective communication about your BATNA is critical during negotiations. There’s nothing wrong with being transparent about the fact that you’re still weighing up your options. In fact, by making your vendor aware that you have other viable alternatives, you reinforce your negotiating position.

Through demonstrating a willingness to explore alternatives, you can foster a more collaborative atmosphere, motivating SaaS providers to present competitive offers and proactively address any concerns with the contract you might have.

In this sense, leveraging BATNA in SaaS negotiations is not just about having a fallback plan; it’s about using this knowledge strategically to incentivize the best possible deal from the vendor you’d prefer to partner with.

Adapt your strategy as negotiations progress

If you’re going to most effectively leverage your BATNA, you need to be agile in your approach to negotiations. Given the dynamic nature of the SaaS landscape, it pays to regularly reassess and update your BATNA as circumstances evolve. External factors like new entrants to the market, technological advancements, or internal changes in your own business requirements can influence the strength of your alternatives.

Negotiations can take months though — and for the largest contract purchases, sometimes up to a year. By staying informed and adaptable, you can better capitalize on emerging opportunities and make timely adjustments to your negotiation strategy.

Other factors to consider when leveraging your BATNA

It can be tricky to strike the right balance between your organization’s and your vendor’s needs when negotiating. But regardless of whether you’re purchasing or renewing a SaaS subscription, there are many factors you’ll need to consider when leveraging your BATNA as a negotiation technique.

Our very own Head of Purchasing, Nick Riley, recently discussed some of the different elements that deserve your attention. Here’s what Nick had to say:

“When it comes to new purchases, it’s often straightforward — just exploring alternative suppliers. But when it comes to renewals, there’s a whole new set of considerations to keep in mind.

1. Relationships

You might have built fantastic relationships with your current provider’s team. Building trust takes time, and these connections matter. When you bring other vendors into the fray, you run the risk of eroding the rapport you’ve already established.

In leveraging your BATNA, take a constructive, collaborative approach with your current supplier so they know that even though you have other options, your priority is to reach a good deal with them.

2. Costs to move

Shifting to a new SaaS provider can be intentionally challenging and time-consuming. Often, the cost of migration outweighs the potential savings. That’s not to say that you can’t work towards procuring a better deal from your current provider, but you need to consider whether your next best choice is actually a wise investment for your business should you get to the point of switching.

3. Internal dependency

In most cases, multiple teams rely on a single tool. How will you handle issues across teams and provide training on the new tool effectively if you do switch? Naturally, this will come with some productivity stalls and costs of its own that you need to consider.

4. Unique Selling Points (USPs)

No two SaaS companies do things exactly the same way or use identical pricing structures. Assessing distinctive features can be incredibly time-consuming. This is when it pays to consult industry experts or stakeholders in your business who can provide insights about the value provided by different tools.

To navigate these complexities, one key strategy is to give yourself ample time. Sometimes you will need as long as 12 months. This extended time frame allows you to thoroughly evaluate your BATNAs, ensuring you make the best decision for your business, not just the one with the least resistance.”

— Nick Riley, Head of Purchasing at Vertice

How Vertice can support BATNA negotiation

Software negotiation is a time-consuming process, involving hours of research and countless moving parts. As a core component of many negotiation strategies, seeking reliable intelligence about your Best Alternative to a Negotiated Agreement can be challenging — but this is where we can help.

Vertice has access to the pricing and discounting data for more than 16,000 global SaaS vendors, supporting countless procurement teams to negotiate best-in-class software contracts. With our exclusive pricing intel, you’re equipped with up-to-date pricing information to leverage in your negotiations process.

But that’s not all we do.

Our expert team of software purchasers are also on hand to handle negotiations on your behalf, managing all communications with your chosen vendors and ensuring a smooth purchase or renewal turnaround. When you choose Vertice as your procurement partner, you unlock the benefits of a seamless procurement process — passing the time, money and labor savings onto your team to re-invest in more strategic business priorities.

Find out how much your business can save from an optimized purchasing cycle or read how we cut one organization’s SaaS procurement time in half and delivered 33% savings on strategic contracts.