See what the biggest renewal challenges are and learn SaaS renewal best practices to reach a proactive renewal process backed by license usage and defined guidelines.
► Learn how to implement SaaS renewal best practices!
With cloud-based technologies on the rise, companies accumulate a great amount of SaaS applications and quickly lose oversight not only when it comes to usage, but also renewal. Thus, it is not surprising that larger organizations experience an extremely high number of SaaS renewals on a regular basis – some or many of them are automated and happen completely unnoticed.
That’s why every business relying on cloud-based applications needs a proper system that allows for efficient SaaS contract management and provides maximum SaaS portfolio visibility. After all, this is the only way to decrease unnecessary shadow IT, cloud spend, security threats and to get the best value out of every SaaS application that is procured.
Read on and learn about SaaS renewals' best practices and how they address the challenges that SaaS subscriptions and contracts bring about.
Challenge: Even though storing contract details sounds like a fairly intuitive practice, many businesses fail to do so. Contracts are often saved in random places that are difficult to access, especially after some has passed. And the more populated the SaaS landscape becomes, the more contracts there are to store.
This lack of visibility leads to SaaS contracts being auto-renewed by the vendor before they can be re-negotiated. To find out whether your contract management system works is easy: Take any given SaaS application and see if you can quickly retrieve the following information:
Best Practice: Chances are high that you won’t have the time to read through an entire contract every time you need a specific detail about a SaaS application. That’s why it’s advisable to extract the most important details about each application and store them in one place.
Ideally, these details should cover items like the vendor name, the contract value, the owner, as well as its term or renewal date, category, and purpose. For prioritization purposes, you should also indicate how critical the application is to your business.
Challenge: The bigger the company, the more SaaS applications will be procured over time. And due to the rise in digital literacy, even non-IT employees feel empowered to get the right applications for their tasks.
However, if SaaS ownership isn’t documented properly, it’s much more difficult to cancel or optimize SaaS renewal. More often than not, the owner remains unknown or has already left the company, and by the time you reach out to the vendor to confirm application ownership, the negotiation window might have closed.
Best Practice: The easy solution to the outlined challenge is assigning SaaS ownership from the start and keeping this information in the same place as the other contract details. The owner of an application is also responsible for re-negotiating renewal terms by acting in accordance with the renewal guidelines. If the owner is leaving the company, this role needs to be re-assigned.
Challenge: When you procure a SaaS application you never technically “own” the software but you’re renting it. This means that the more cloud-based software you have, the more SaaS subscriptions and contracts you accumulate.
A vast majority of these subscription models come with automatic renewal, so the contract period is renewed for another subscription cycle if you don’t reach out to the vendor 60 or 90 days prior to the specified date. If you miss the deadline, you’re stuck in another contract even though you might not need the application anymore.
Best Practice: An easy way to keep track of all upcoming SaaS renewals is the use of a SaaS renewal calendar that notifies you or the respective SaaS owner ahead of time, so you always know when it’s time to take action.
With a good renewal management plan, an organization gets to make proactive renewal decisions by reviewing original purchase agreements and contracts and creating negotiation strategies that don’t leave them at the mercy of the vendor. A SaaS management platform like LeanIX lets you create custom alerts, so you’ll never miss a negotiation window.
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Challenge: Business needs and team structures are dynamic and keep on changing which is why most companies end up with SaaS applications that are not being used or overlap in their functionalities. However, having access to usage trend data to track SaaS usage mitigates this problem and makes sure that you are not paying for software or software features that you don’t even need. This is why companies who monitor usage are more likely to curb their cloud spend to a minimum.
Best Practice: To eliminate underutilized software licenses, it’s best to research historic and current usage trends for each application. This will allow you to make an assessment of the potential future increase or decrease of headcounts for each upcoming renewal. A SaaS optimization platform like LeanIX allows you to create the visibility you need to detect which applications are eating up unnecessary costs. Once you’ve defined a standard, you can repeat the process to assess your licensing needs and rightsize your seats.
Challenge: Not every SaaS application has the same level of importance when it comes to business operations. That is why contracts for business-critical software are usually of much higher value and need to be paid closer attention to than those for applications that are simply nice to have and only make up a fraction of your cloud spend. Thus, missing a really important renewal that should have been optimized and negotiated can create much more damage than missing a minor one.
Best Practice: In order to never miss out on an important renewal make sure to prioritize your renewals based on the following criteria: contract value, business criticality, and the renewal time horizon. The rules below match the SaaS optimization approach and can serve as a guide as you make your decisions on renewals prioritization:
Challenge: In the worst-case scenario, a company that is using cloud- and subscription-based software does not have a SaaS renewals strategy in place or there is no clear owner of the SaaS application and its renewal process. Clearly, this leads to a lot of unnecessary cloud spend and a bloated IT landscape that is drastically reducing the benefits of getting SaaS solutions in the first place. And that is why you need to define a good renewal strategy beforehand, so your employees know what to do.
Best Practice: The best way to get your renewals process under control is to define clear guidelines on how to tackle renewals for the SaaS applications being used. The guidelines should cover each step of the renewal process and include a timeline that specifies when the employee should begin with the internal or external outreach procedures. Make sure that the renewals strategy is a written document that is easily accessible to existing and future employees.
While most organizations tend to focus on SaaS procurement and how to get the best cloud-based product for their business needs, SaaS renewals practices often get neglected or overlooked. However, having a functioning renewal process in place supports IT and Finance departments and helps every company get the best out of SaaS technology and cut down costs.
However, before you can establish best practices for renewals, you have to create maximum SaaS visibility – ultimately, this will help you find the right owner, track usage, build a functional renewal calendar and prioritize the right contracts.
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How do I prioritize SaaS renewals?