How Financing a SaaS Solution Has Come Full Circle

Paying for Software-as-a-Service (SaaS) solutions has significantly evolved in the last few years. While some SaaS offerings are available on a month-to-month basis, most deals now offer a discount for signing up for multi-year contracts. This offers the opportunity to lock in much lower prices – but usually only if you have the cash/funds to pay for it upfront.

Yet one of the early arguments in favor of SaaS was the ability to replace capital investment in software (CapEx) with ongoing operating expense (OpEx) payments.   So why are we back to an upfront model?  SaaS vendors are paying much more attention to their own cash flow, and the sizeable investment that is now often needed to provision for large clients.  The result being upfront multi-year contract agreements.

Your business also faces its own budgetary pressures.   Now, possibly more than ever before, organizations are looking to manage or even reduce expenses while still trying to maintain or grow the business. This does not lend itself to laying out large single payment.

What’s the solution?  We have now come full circle and some vendors and resellers have seen the opportunity to enable customers to create payment plans for SaaS that suit their business and their pocket.

So how does it work?  Put simply, you spread the upfront cost of a 1, 3 or 5-year licence across regular monthly or quarterly payments.  But that’s not all – as well as leveling out your payments this type of arrangement has a number of other benefits:

  • 100% tax-deductible for private sector organization
  • Retains capital that can be deployed elsewhere
  • Costs are in line with return on investment
  • Investments decisions less restricted by budgets
  • Fixed costs for the duration of the agreement
  • Spread VAT payments (in line with then each payment is made)
  • Option to add in additional costs such as consultancy into one project cost

The impact of COVID-19 means that every enterprise needs to get the best deal they can whilst managing cash flow at the same time.  Looking at how you finance your SaaS solutions is likely to become increasing important in a post-lockdown world.

Contact us or call us on 0845 625 9025 to find out how we can help you keep projects moving forward without having to take a massive hit to your budget.