What is decentralized procurement?
Decentralized purchasing in SaaS refers to the process of allowing individual departments or teams within an organization to make their own purchasing decisions for software applications. This is in contrast to a centralized purchasing model, where all purchasing decisions are approved by a single procurement team or a department such as finance.
While a decentralized purchasing model can provide teams with the flexibility to select and purchase the tools that best meet their needs, without having to wait for approvals or navigate bureaucratic purchasing processes, it can create challenges for the company. This can include reduced buying power, higher costs, lack of control over vendor relationships, and increased compliance and legal risks.
Related Definitions
Auto-Scaling
What is auto-scaling?
Auto-scaling refers to the automatic adjustment of cloud computing resources based on an organization’s current demand and workload. It dynamically adjusts the allocation of resources to match the evolving requirements of an application or system without the need for manual intervention.
There are a number of benefits to using auto-scaling, the first being cost efficiency. By ensuring that resources are scaled up or down as and when needed, organizations can avoid over-provisioning and subsequently reduce unnecessary expenses. It also helps maintain consistent performance levels by automatically adding resources during peak demand periods.
Reduction Clause
What is a reduction clause?
A reduction clause refers to a provision in a software agreement that allows customers to reduce the number of licenses or users covered by their subscription during the term of an agreement. This provides customers with flexibility to adjust their plan to meet evolving business needs, while avoiding paying for licenses or users they no longer require or needing to terminate the contract. The specific terms and requirements of a reduction clause may vary depending on the SaaS provider and the subscription agreement, for example it may be subject to a minimum number of licenses or users.
Cloud Unit Economics
What is cloud unit economics?
By definition, cloud unit economics refers to the financial analysis and evaluation of both the costs and revenue associated with operating a cloud-based business.
In other words, it’s a way of looking at how much it costs to run your business on the cloud, as well as how much it brings in.
SaaS Stack
What is a SaaS stack?
A SaaS stack is a collection of software-as-a-service (SaaS) applications and tools that are used across an organization. While the specific contents of any SaaS stack will vary depending on the nature of the business, it will typically consist of communication, collaboration, sales, marketing, HR, finance and data analytics software.
Price Uplifts
What are price uplifts?
In the context of SaaS, price uplifts refer to an increase in the price of a software subscription. While many software providers will implement price uplifts on an annual basis, typically at the point of renewal, others may review and amend their pricing more frequently, for example on a quarterly basis. It is recommended that buyers negotiate a price uplift cap during the initial contract negotiation stage, placing a limit on the maximum amount the subscription can be increased by within a specified time period.
Reserved Instances
What are reserved instances?
Reserved Instances (RIs) are a pricing and capacity reservation offering provided by AWS for their EC2 (Elastic Compute Cloud) and RDS (Relational Database Service) services.
They specifically allow users to commit to using a specific instance type in the same region for either a one or three-year term, in exchange for discounts of up to 72% – the exact discount is ultimately dependent on the commitment term, instance type, availability zone and region.
There are various types of Reserved Instances available, each with different terms and levels of flexibility. Standard Reserved Instances provide the highest cost savings but are the least flexible, whereas Convertible Reserved Instances offer more flexibility by allowing you to change instance families within the same instance type.
In contrast, Scheduled Reserved Instances offer a lower discount, but allow you to reserve capacity for specific time windows, such as business hours or weekends, providing cost savings for predictable workloads.