The Definitive Guide to

SaaS Renewal Strategy

Learn how to build a proactive SaaS renewal strategy & process within your organization using renewal prioritization, actual SaaS usage, and custom renewal alerts.

► See how to implement proactive SaaS renewal strategy!

Introduction

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.

 

SaaS renewal strategy goals

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:

  • Prevent missed renewal dates
  • Remove unnecessary waste
  • Increase SaaS value
  • Empower employees
With these objectives in mind, you can start preparing for your SaaS renewals in a way that is efficient and saves you from future headaches.

 

Preparing for SaaS renewals

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.

Achieve SaaS visibility

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.

Control Your SaaS

Create a renewal calendar and set alerts

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.

LeanIX SI SaaS Renewals Calendar with automated alerts

Establish app ownership

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.

Prioritize renewals

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.

A Guide to SaaS Management

White Paper

A Guide to SaaS Management

Introducing the discipline of SaaS management, key drivers for its use, and how it can mitigate the risks of sprawling SaaS landscapes.

SaaS Management for CIOs and CFOs

White Paper

SaaS Management for CIOs and CFOs

A guide for helping CIOs and CFOs manage SaaS portfolios, drive quick wins, and improve strategic decision-making.

Why APM and SaaS Management are Better Together

Webinar

Why APM and SaaS Management are Better Together

Watch this on-demand webinar about the acquisition of Cleanshelf, a leading solution for SaaS Management. This makes LeanIX the first EA tool vendor with automated SaaS Discovery built-in.

SaaS Management - The definitive guide for IT and finance leaders

eBook

SaaS Management - The definitive guide for IT and finance leaders

This eBook is a comprehensive guide to SaaS management containing inspiring industry voices, practical advice, deep insights, and sound knowledge on this critical field of IT management.

6 Steps to Optimize SaaS Productivity and Security

Poster

6 Steps to Optimize SaaS Productivity and Security

A poster for ensuring non-centrally managed IT is always well-managed from a cost, security, and compliance standpoint to drive efficiency and productivity.

SaaS Management ROI Calculator

Tools

SaaS Management ROI Calculator

Identify potential savings in your SaaS portfolio.

9 Steps to SaaS Management Success

Poster

9 Steps to SaaS Management Success

How to plan and implement a SaaS management tool to create long-term value.

5 Key Views for SaaS Spend Optimization

Poster

5 Key Views for SaaS Spend Optimization

5 pointers that help organizations get a better return on their SaaS investments.

Should you renew the software contract or not?

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:

  • Is the SaaS product actually used by the employees in your company?
  • Is the application critical to your business or simply “nice to have”?
  • Is the product within your budget or could you find alternatives for better conditions?
  • Do you have too many or not enough licenses for your needs?
  • Does the SaaS still satisfy your evaluation criteria?
  • Do you already own a SaaS application with similar functionalities that makes one product obsolete?

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.

 

SaaS renewal guide

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:

  1. Replacing the application or retrain employees to use certain features
  2. Eliminate application completely
  3. Renegotiate the pricing before renewal
  4. Renew the application and consider expanding the licenses
After organizing your renewals according to the categories above, just select one specific upcoming renewal – preferably the one with the highest priority – and start with the actual renewal process that is outlined in the following steps.

1. Look for the auto-renewal clause

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.

2. Evaluate SaaS usage

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.

LeanIX SI SaaS usage graph based on license usage.

3. Understand license types and needs

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.

4. Explore vendor’s success metrics

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.

5. Contact a sales representative

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.

Conclusion

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.

Free White Paper

Implement Proactive SaaS Renewal Management

See how SaaS management uncovers all SaaS renewals within your company, creates a renewals calendar, and gives you negotiation support with the actual usage data of each application.

Preview the first 7 pages

Page: /

Fill out the form to get the full version

Answers to frequently asked questions on SaaS renewals strategy

How to manage SaaS renewals?

SaaS Management platform is the most effective and efficient way to manage renewals. It gives you full visibility into your SaaS portfolio and identifies all existing renewals. With a complete portfolio identified, organizations can create a renewals calendar and set renewal alerts that combined with actual usage and application owners enable a proactive renewal strategy.

What is a SaaS renewal?

SaaS renewal is a term related to Software as a Service companies that offer a subscription-based model to their customers.

EN-SaaS-Management-WP-Resource_Page_Thumbnail-1

Free White Paper

A Guide to SaaS Management

Download