Learn how to build a proactive SaaS renewal strategy & process within your organization using renewal prioritization, actual SaaS usage, and custom renewal alerts.
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As more and more businesses move towards cloud-based software solutions, there is a growing amount of SaaS contracts that need to be properly managed, so they don’t drive up the cloud spend more than necessary. However, with increased digital literacy and employees procuring SaaS applications on a whim, it is difficult to keep an eye on the entire cloud landscape and the renewal terms of every single product.
That is why every organization operating in the cloud should strive to create maximum SaaS visibility and put a standardized renewal process in place. After all, SaaS applications are subscription-based and thus, renewed automatically if not canceled in time.
Read on and learn about the best SaaS renewals strategies and processes, and how to practice proactive SaaS renewal management within your organization.
Once you’ve recognized that your SaaS renewal strategy needs to be changed or that you need one in the first place, you should ask yourself what your main motivators are. By defining your goals first, you’ll make sure to take advantage of all the benefits a good renewal strategy can offer. In most cases, those goals aim to do the following:
In order to create a SaaS renewal process that will serve your company, employees, customers, and everyone else involved in the best way possible, there are a few requirements you should pay attention to. Read on to learn about SaaS renewal considerations and how to properly establish SaaS renewal best practices within your organization.
If nobody is aware of an existing SaaS subscription that might not even be used anymore, automatic renewal kicks in and you lost out on the opportunity to renegotiate or cancel the respective contract. That is why you first have to create full visibility of all SaaS services. And once you reach that visibility, it is easy to uncover your actual SaaS usage and the number of licenses you’re paying for.
The easiest way to create SaaS visibility is through a SaaS management platform that comes with a variety of features including a renewal calendar. This tool can be customized and will notify you when there’s an upcoming renewal, so you have time to review the respective application, its conditions, and usage patterns. The tool also allows you to focus on high-value renewals that might be more business-critical than others.
Before the era of cloud-based applications, there would hardly be software that your IT department wouldn’t know about. Nowadays, almost any employee feels empowered to download a SaaS application in the hopes to increase productivity. However, it’s important to establish SaaS ownership – this makes negotiations a whole lot easier and gives you valuable insights about vendors. Should a SaaS owner leave the company, this ownership needs to be reassigned.
Prioritizing renewals is an essential part of a proactive renewal process. After all, not every SaaS application is critical to the business. With hundreds of renewals to deal with, it’s vital to prioritize those that make up a bigger value and provide the biggest optimization opportunities. But next to business criticality and the actual contract value, the renewal time horizon should also be on your criteria list – the closer the renewal date, the sooner you should act.
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Sometimes, it’s not glaringly obvious whether a SaaS subscription should be renewed or not. Thus, you should take your time to evaluate each application before making a definitive decision. So, when it’s time to review, renegotiate or cancel your SaaS contract, simply ask yourself the following questions:
Once you have answered these questions, making a renewal decision will be much easier and lead to improved cloud spend and security within your organization. Read on to learn about the detailed steps in your SaaS renewal efforts.
Ultimately, the goal of a good SaaS renewal strategy is to fit your renewals into a few predefined categories. Based on the actual usage data and answers that were provided by the questions in the previous section, there are 4 categories in total:
Since most SaaS contracts are subscription-based, the vendor will expect you to renew your contract after the first cycle and usually gives you a renewal window in case you want to cancel or switch to another license type. However, if you miss that window, SaaS auto-renewal kicks in and you are obligated to pay for another full subscription cycle.
This is why knowing the renewal window, finding the auto-renewal clause in the respective contract, and confirming it with the SaaS vendor is the first important step in the renewal process.
You should never be paying for a product or license that you’re not using. However, in the world of SaaS and shadow IT, it’s very easy to lose track of who of your employees is using which software to get the job done, or whether they’re even using it at all. So before you are renewing the application, you have to evaluate the actual SaaS usage and compare it to what you’re spending.
This can be done by using the vendor's analytics or through a SaaS management platform like LeanIX's SaaS Management Platform (SMP). The latter allows you to monitor usage patterns over time and quickly pull up usage data for 4000+ vendors whenever you need it.
Once you know about the actual SaaS usage patterns, you can compare them to the available license types. Oftentimes, companies pay for a bigger license package than they need, so it’s important that you do your research and work with a sales rep to understand the vendor’s different pricing and license types.
It is also quite common for SaaS vendors to change their licenses and pricing types, similar to what Microsoft did with their Office 365 licenses. This way you might find a better deal after the first subscription cycle has ended. It is also always worth it to negotiate special pricing with your vendor as the SaaS market is quite competitive.
This step ties into the previous one. When negotiating and renewing a contract, it is always useful to understand what the vendor is trying to achieve. Customer Success Metrics (CSM) are extremely important to SaaS providers and their stakeholders. And one of the key measures is Customer Lifetime Value (CLV), which is maximized when customers choose to renew their contract cycle after cycle. So, CLV is clearly a strong incentive to get a customer to stay.
Another metric is the Churn Rate – the proportion of customers who opt out of the contract. Acquiring and onboarding customers is much more costly than keeping an existing one. Make sure to learn the right contract negotiating tactics before moving on to the next step.
When you are ready to either renew, cancel or renegotiate the SaaS contract, it’s time to contact the respective sales rep. In any case, but especially when you are trying to renegotiate the contract conditions, you have to make sure that all the gathered information is easy to access.
Even if the renewal is coming up shortly, it is always best to take the time you need to prepare. Most vendors not only have sales representatives as your point of contact but also customer success teams that nurture the post-sales relationship with the client.
SaaS renewals management is an important part of SaaS management as a whole and ensures that you reap the full benefits of using SaaS applications in the first place. The outlined strategy in this guide along with SaaS renewal best practices can be used to create your own standardized process replacing a reactive renewals strategy with a proactive one.
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