This two-part blog series provides a practical guide to creating a business case for SaaS software. While written for software sales teams and implementation partners, anyone looking to champion a solution for a business or team will find many practical and applicable insights as well.

In this blog, we define a business case, address when one is needed, and outline the typical components. We then get into a bit more depth around comparing two solutions, and the difference between a new software investment versus a renewal.

In the second blog of this series, we dive into the importance of “soft benefits,” review the typical process of (and resources needed for) creating a successful business proposal, and conclude with practical guidance regarding maximizing your chance of success with the approval process.

1. What is a business case?

A business case answers this question: “What will happen if the organization proceeds with an investment proposal?” The goal is to get the board or management to approve an investment in software or a project.

A business case is necessary to demonstrate why a software investment, or a project, is recommended and what the benefits of the project will be when it’s completed. Usually, a business case is presented in a structured document detailing the rationale to convince the ultimate decision makers to approve the investment recommendation.

Often including a comparison of two or more alternative investments, and the possibility of foregoing an investment altogether, a business case enables leaders to align stakeholders’ expectations regarding a project’s purpose, approach, outcomes, and benefits. It also outlines investments and risks, and it helps marshal leaders’ support and participation, thereby increasing the likelihood of a project’s approval and ultimate success.

2. When should we create a business case?

You should only engage in providing a business case when your team has already determined:

  • There is a real need for this investment in the near future
  • The budget is attainable given the circumstances
  • Key stakeholders and decision makers are satisfied the solution addresses the organization’s opportunity or problem
  • Any significant functional or technical objections have been satisfactorily addressed.

If you attempt to roll out a business case before having addressed the above, the discussion risks being too theoretical. When stakeholders don’t clearly understand the specific benefits of your proposed solution and how they could obtain them, it’s hard to develop financial benefits — which are often the final word for any investment.

3. What are the typical components of a new SaaS solution acquisition business case?

The following is a comprehensive description of the elements that need to be addressed and articulated in a full business case:

Current situation and business opportunity
  • Cleary lay out the business challenges, pain points, and requirements as well as the business opportunities that can only be addressed with this investment. This requires a clear external and internal capability gap assessment. If management is not convinced of the desirability of the strategy and attendant future state, you might as well stop there.
  • A sense of urgency is especially important. Tie the investment to strategic considerations such as a fit with the broader business and IT initiatives (e.g., fit with a strategic initiative for data-driven business transformation).
Solution & roadmap recommendation
  • This section should include a clear description of the future state of the business once this solution is implemented, and how your recommended SaaS solution addresses the business and technical requirements to arrive at that future state. If you are a vendor building the business case, make sure you include the implementation partners’ capabilities and highlight use cases and capabilities that differentiate you and your partner from competitive solutions/proposals.
  • The solution description should also include a high-level implementation roadmap clarifying timelines and resource levels.
  • Detailed demonstrations of the software and how it addresses key use cases should typically precede this activity to gain the support of the relevant organizational departments.
Financial business structure
  • Here you have two options:
    1. A benefits-only business case, focusing on costs, revenues, and margins
    2. A full business case, including investments and ROI
  • Sometimes it’s useful to run several scenarios — low, medium, and high financial cases. Make sure you understand the margin structure of the specific product or service lines involved. Get agreement on the appropriate margin definition — gross profit or contribution margin reflecting other direct operating costs.
Key input and outputs
  • Typical full ROI business case criteria include deal timeframe, outputs such as NPV, Payback month (‘period”), and, infrequently, IRR. Also, to derive the discounted values and the IRR, the “hurdle rate” (or minimum required rate of return) on this type of investment must be clarified.
  • Investment components include the license and hosting costs for the entire duration of the software subscription, as well as implementation costs — both initial and ongoing (e.g., managed services, related business consulting services). You may also be asked to include internal resources costs. The estimates will be developed with your sales engineers and the partner lead (typically) and approved for use by sales management.
  • Benefits include technology cost avoidance — the removal of existing technology costs (e.g., infrastructure, hosting, licenses, subscriptions, IT upgrades, and IT maintenance costs). Often the software subscription and full implementation leads to operating cost reduction in departments such as marketing, sales, operations, customer service, and supply chain/logistics.
  • Often the most compelling benefits are tied to new revenue or revenue enhancement opportunities. These may include the ability to address new markets/segments. They can also include increases in campaigns, leads, sales conversions, average order/contract/subscription values, cross- and up-sells, purchase frequency, and share of household and customer retention and lifetime value.
  • Solutions that improve business agility and accelerate transformation should also include improved time to value — the ability to accelerate revenue. This can be the result of the ability to produce more campaigns. Or it could be from the accelerated introduction of new products to market. One of our financial- asset-management customers realized that shaving just a few days off the complex regulatory-heavy product introduction process (think new mutual or exchange traded funds) could accelerate revenue by millions per year.
  • Proof points: Quantify benefits using benchmarks from prior customer case studies as well as research sources provided by industry analysts and consultants (e.g., McKinsey, BCG, Bain, IDC, Gartner, Forrester, and others). Depending on audience, you may relegate the proof points to footnotes, or include more elaborate customer stories.
  • Make sure you understand the timeframe by which these benefits come online. It often moves the payback month out 3-12 months.
Cost of delay
  • Finally, a useful metric can include the “cost of delay” — a delay of 6 months, as well as a calculation of the value forgone by not proceeding with the purchase or program. It can be derived from cash flow estimates, or simply calculated off the average net benefits number ((average monthly benefits – costs)/investment). Some executives love this approach to highlight program urgency, while others view it as a pressure tactic. Gauge your audience and consult your internal coach(s).

3. TCO: Comparing two similar SaaS solutions

When two solutions are similar and promise remarkably similar benefits, some organizations reduce the exercise to comparing the Total Cost of Ownership (TCO) of the competing solutions.

Gartner defines the TCO as “…a comprehensive assessment of information technology (IT) or other costs across enterprise boundaries over time. For IT, TCO includes hardware and software acquisition, management and support, communications, end-user expenses and the opportunity Cost of downtime, training, and other productivity losses.”

To this comprehensive list we recommend adding implementation costs, differential licensing costs and potential renewal fee considerations, the cost of adopting potential additional modules, and data migration costs. In our experience, a careful analysis does bring out cost differences.

4. What about justifying a SaaS license renewal?

Managing a successful SaaS subscription renewal requires proactivity from all teams involved.

The lion’s share, however, falls on the software business itself. Customer Success should collaborate with the customer from day one to reduce implementation risks and time to value. Sellers should start discussions with the customer IT Asset Management team early — 90 days before renewal date — to understand the approach they will take. The vendor should help implement a success program that proactively tracks and documents the performance of the existing solution and the delivered benefits or ROI during the current and prior subscription periods. They should also prepare a sales document that can be shared with decision makers in IT and the business.

And guess what, SaaS software providers such as Shark Finesse, Gainsight, Totango, or ChurnZero (no endorsement) sell software to assist you with all this.

In our experience, there are three approaches to conducting a business case, or a value assessment for a subscription renewal. You may need to develop two or all three, depending on the competitive situation.

Three business case approaches

1.Value delivered to date
2. Value expected in the contract period (vs. cancellation)
3. Value or ROI expected vs. alternative solution

Demonstrate progress on:

  • Adoption/usage
  • New features used since last contract date

Quantify business outcomes:

  • Cost avoidance (if any)
  • Operating savings
  • Productivity enhancements
  • Reduced external spend
  • Improved revenue
  • Time to market
  • Risk avoidance, reduced compliance costs
  • Cost of downtime
  • Customer and employee satisfaction
  • Cost avoidance
  • Operating savings
  • Productivity enhancements
  • Reduced external spend
  • Improved revenue
  • Time to market
  • Risk avoidance, reduced compliance costs
  • Cost of downtime
  • Customer and employee satisfaction
  • Subscription costs or hosting costs
  • IT upgrades, integration costs
  • Transition costs (for alternative)
    • Contracting & implementation
    • Ramp-up delays and risks
    • Onboarding and training
    • Reduction in business performance during ramp up
  • Cost avoidance
  • Operating savings
  • Productivity enhancements
  • Reduced external spend
  • Improved revenue
  • Time to market for new features, products
  • Risk avoidance, reduced compliance costs
  • Cost of downtown
  • Customer & employee satisfaction


Whether you’re justifying a renewal or making the case for an entirely new investment, we hope the information here has helped. When you’re ready to learn more, you can find part two of this series here.

Elan Bair is a Principal Value Consultant at Sitecore. Follow him on LinkedIn.