A SaaS renewal is a business term that refers to the process of renewing existing SaaS subscriptions.
“In the subscription economy, the connection between your customer success and your success is much more direct.”
- Ken Lownie, a SaaS services leader
Gartner predicts that SaaS spending will reach $195 billion in 2023, up from $167 billion in 2022. In addition, SaaS applications are now owned by individuals and business units instead of IT because anyone can buy a SaaS tool at the click of a button. But, this ease of buying has created a problem of uncontrolled SaaS growth. With over 40% of companies using more than 50 SaaS tools yearly, mismanagement of SaaS renewals eats into company profits.
Decentralized SaaS buying helps reduce costs, enables proof of concept, eases implementation and enhances scalability. But automatic renewal clauses in SaaS subscriptions cause the company to be expensed even if the tool is not used.
That’s why high-growth companies need a SaaS management tool that automatically tracks renewal dates and generates alerts 90-120 days ahead to give teams enough time to evaluate the tool.
In this guide on SaaS renewal management, we’ll take a look at the following:
When the renewal date for a SaaS tool is near, end users renew their subscriptions either manually or automatically.
SaaS renewals give companies a chance to review their spending and usage.
Is the application being fully utilized?
Do they still need it?
Knowing when renewals are due helps companies answer these questions and adjust for better growth and future needs.
However, keeping track of all the known and unknown applications being used across a company can be challenging. That's why it's important to have a robust SaaS renewal strategy.
Instead of being blindsided by renewals, a SaaS renewal strategy ensures companies are well-prepared with their next course of action when the renewal date comes around. A SaaS renewal strategy will help you:
Instead of dealing with SaaS renewals when they arise, it's better to create a renewal plan ahead by 90-120 days (or longer for big suites like Microsoft or Salesforce). In this way, you can avoid missing renewal dates and getting locked into contracts for another year.
You must know what SaaS tools you have before you can manage it effectively. This helps you identify who owns and uses which applications across your company. It also allows you to balance the needs of IT, other departments and individual users. Aim for an optimal utilization rate of around 90%.
Once you know who uses what, it's time to rationalize and right-size your SaaS portfolio. Look for redundancies in your software stack. Identify applications that serve the same purpose or where you're paying for more licenses than necessary. Consolidate or eliminate these applications during the next renewal cycle or even sooner.
A renewal calendar helps you map out and manage renewal timelines so that you’re not surprised by unexpected renewal alerts. You can also review contract terms well in advance.
When you're prepared for renewals, you have the power to renegotiate better SaaS contracts to get more bang for your buck. Some best practices for negotiating your SaaS contracts are:
We’ll now take a look at why SaaS renewal management could be challenging for some companies and provide tips to overcome them:
We recommend some best practices to help you handle renewals more effectively:
Avoid using credit cards for software subscriptions. Ask for a quote, raise purchase orders and pay periodically. By eliminating auto-renewals, you can take more control over the renewal process and avoid surprises.
Integrate SaaS renewal management with spending and contract management to streamline your processes. Having all three areas managed by the same team using an automated tool is ideal.
Look for a vendor management solution like Spendflo that goes beyond renewal management and helps streamline your SaaS-related procurement, finance and IT tasks.
Spendflo helps procurement teams manage SaaS renewals proactively. It provides complete visibility of your SaaS assets and allows you to establish a reliable system of record. With this information, you can use data-driven insights to stay on top of renewals, prepare efficiently and negotiate from a position of strength.
You can also manage existing contracts effectively with valuable insights, dates and data to support your optimization efforts.
Spendflo’s renewal alerts inform you about upcoming renewals 90-120 days in advance, allowing you to manage them proactively.
Schedule a demo today to see how Spendflo can help your company manage your SaaS tool stack and achieve better ROI.
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