“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: 

  • What are the goals of a SaaS renewal strategy
  • How to prepare for the renewal of a SaaS tool
  • What are the stumbling blocks in SaaS renewal management
  • How to negotiate a SaaS renewal contract
  • How to avoid the common problems with SaaS renewals

What is a SaaS renewal?

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.

Goals of a 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:

  • Identify SaaS ownership: The first step is knowing who uses which SaaS applications. This visibility allows you to track spending and usage more efficiently.
  • Prevent missed renewal dates: Missing a renewal means missing an opportunity to evaluate, prepare in advance and avoid paying for subscriptions that are not being used.
  • Empower line of business owners: Business owners can make intelligent decisions when purchasing SaaS applications if they are on top of the renewal dates for their tool stack.
  • Improve value: By eliminating redundant spending and creating enterprise agreements, you can maximize the value of your SaaS subscriptions.
  • Manage proactively: A SaaS renewal strategy shifts your approach from reactive to proactive management. 

How to prepare for a SaaS renewal

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.

  1. Get visibility on your SaaS tools

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%.

  1. Right-size your SaaS spending

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.

  1. Create a renewal calendar

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.

SaaS renewal best practices to negotiate contracts

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:

  • Gather insights and research: Understand how your team uses the SaaS tool, know the terms and limitations of the contract and identify areas that need review. Use SaaS pricing benchmark data to ensure you're getting the best deal.
  • Partner with internal stakeholders: Involve relevant stakeholders in the SaaS management process who can provide additional leverage for negotiating better prices for multi-year contracts.
  • Build relationships: Trust and goodwill can be beneficial in negotiations, especially during tough economic times
  • Communicate openly with the vendor: Be transparent about your needs and reasons during negotiations. Vendors can then provide potential workarounds, leading to a favorable outcome for both of you.
  • Be proactive with renewals: Planning for renewals puts you in a better position for renegotiations. It also helps control costs and avoids relying on auto-renewals.

Challenges in SaaS renewal management 

We’ll now take a look at why SaaS renewal management could be challenging for some companies and provide tips to overcome them:

Challenge #1: Identifying the purchasing department and owner for each SaaS tool

  • Look at the business unit or individual expense records to identify who owns the SaaS tool. 
  • Use a SaaS management platform that consolidates team and individual application usage data to identify the relevant stakeholders to communicate with.

Challenge #2: Gaining visibility into all SaaS spending

  • Regularly track expense transactions to identify and analyze SaaS spending.
  • Keep all transactions within an expense management platform, which allows for real-time data retrieval from the accounts payable and expense systems.

Challenge #3: Managing contracts and contract details

  • Collaborate with departmental leaders to obtain final contract records and establish a centralized system for storing critical information and files.
  • Maintain all crucial contracts and documents for each subscription in a centralized record system to eliminate the need to search through email threads for critical documentation.

Challenge #4: Creating a renewal calendar with auto-renewal details and key dates

  • Plot all contract renewals on a quarterly, monthly and weekly plan.
  • Simplify the process using a SaaS license management platform that automates the tasks.

Challenge #5: Establishing a repeatable process for purchasing new SaaS tools

  • Give departmental business units information about the SaaS tools they’re using. 
  • Configure custom alerts in a SaaS management platform to notify the team about upcoming payments or renewals.

How to avoid common SaaS renewal problems

We recommend some best practices to help you handle renewals more effectively: 

  1. Say no to auto-renewals

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.

  1. Combine renewal, spending and contract management

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. 

  1. Leverage vendor management software

Look for a vendor management solution like Spendflo that goes beyond renewal management and helps streamline your SaaS-related procurement, finance and IT tasks.

Do you need help with SaaS renewal management? Try Spendflo!

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.

Ajay Ramamoorthy
Content
Karthikeyan Manivannan
Design

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