SaaS renewal management: 4 ways to optimize your SaaS renewals
Discover the importance of a streamlined SaaS renewal management process and four actionable strategies for immediately optimizing software renewals.
For many organizations, the SaaS renewal process begins when they receive a renewal invoice from a supplier.
If that’s true for your organization, you’re probably incurring higher costs than you think.
That's because you’re unlikely to engage in SaaS renewal management best practices that cut spending, such as competitive analysis, price benchmarking, or reassessing whether your business still needs that software tool.
Discover the importance of a streamlined SaaS renewal management process alongside four actionable strategies for immediately optimizing software renewals.
What is SaaS renewal management?
SaaS renewal management is an important aspect of the software contract management process. It puts procedures and policies in place to handle the continuation, cancellation, and renegotiation of SaaS contracts.
SaaS is sold on a subscription basis. Depending on the scale of your company and the terms and contracts you have with suppliers, you may pay for these subscriptions monthly, quarterly, or annually.
In most cases—some monthly subscriptions being the exception—you’ll have a written agreement with your software vendor for a fixed term. For example, you might commit to a 24-month term and negotiate to receive a better annual price in exchange.
This is the norm for most business engagements. The critical difference with SaaS, however, is that there is an inherent expectation you’ll continue to use the software platform at the end of that term.
As such, most SaaS contracts auto-renew; your contract will have a clause outlining how that occurs.
This norm of auto-renewing is what drives the need for SaaS renewal management.
As the renewal date for a given agreement approaches, purchasing teams with effective contract management processes must:
- Reassess their organization’s needs
- Determine whether the platform is still required
- Perform new risk and market analyses
- Review price benchmarking data to ensure they’re still getting a good deal
- Consider whether renegotiation is in order
- Review vendor performance data
- Proceed with the appropriate route for renewal (accepting existing terms or renegotiating)
Without a renewal management process like this, your company could spend much more than you realize.
Why SaaS renewal management is a critical endeavor
When renewals don’t hit your radar until the invoice arrives, you have little time to do anything but pay the subscription fee.
If your contracts are set to auto-renew, and you don’t have a solid SaaS renewal management process, you may discover the renewals when you get the “thank you for your payment” notices.
This could mean you miss out on negotiating a better deal—losing the opportunity to review pricing and remove scalability constraints or overage fees that might constrain your growth.
Worse still, you could pass up the chance to cancel entirely. Many SaaS agreements have cancellation policies requiring advanced notice, which could leave you stuck if this is the first you’ve heard of the renewal.
For example, if the cancellation policy requires 60 days’ notice and there’s now just a week before the renewal, you’re too late.
Four ways to optimize your SaaS renewals process
1. Eliminate auto-renewals
The first step is to eliminate auto-renewals.
This requires requesting renewals manually during initial software vendor sourcing conversations.
Once you state that your contract can’t renew automatically, there is more imperative on both ends of the agreement to instigate renewal conversations.
Your vendor will contact you to discuss renewing the contract well in advance, as they’ll lose revenue if you don’t renew.
Similarly, you’ll have a more pressing need to prepare for upcoming renewals. If you fail to organize a renewal in advance, your team will lose access to critical tools they use to maintain the daily operations of your business.
2. Program pre-renewal reminders
Use your procurement management tool to set up automated pre-renewal notifications.
For instance, set an internal policy to begin the renewal consideration process three months before the contract expires. Your procurement platform can deliver an automated reminder when this time comes.
Programming pre-renewal reminders like this help you stay on top of upcoming renewals without crowding your calendar.
3. Use price benchmarking to fuel contract renewal conversations
Never renew SaaS contracts without a detailed analysis of the competitive landscape.
Though you might have completed this market analysis when you first sourced the vendor, it's important to understand that pricing norms could have changed significantly during your contract period.
Of course, you don’t want to spend months collecting and analyzing competitor pricing data, especially if your primary goal is to renew rather than switch suppliers.
Instead, use price benchmarking data to understand what other companies pay for the same product.
This helps you move beyond headline pricing and provides your procurement team with ammunition to fuel more effective negotiation conversations.
4. Merge SaaS renewal, spending, and contract management
Spend, contract, and renewal management should not be separate siloed practices.
To optimize organizational processes, the three should be managed by the same team or at least coordinated collaboratively.
Enable this collaboration and remove data siloes by leveraging a full-stack procure-to-pay solution.
Learn more about these specialized software tools in our guide: What is procure-to-pay, and why does your company need it?
Benefits of a renewal management platform
Most companies manage dozens or even hundreds of contracts simultaneously. EY data even found that the biggest organizations handle more than 350 contracts weekly.
Even at the smaller end of the scale, businesses committed to improving renewal management must employ dedicated software tools to help them monitor existing contracts, vendor performance, and renegotiation processes.
Save time and drive compliance with custom automation rules
The best renewal management tools allow procurement teams to design custom automation recipes that speed up processes and eliminate inefficiencies.
For example, design an approval workflow that allows procurement team members to send contracts directly to decision-making authorities for approval and program automated reminders to combat delays.
This saves time at each process stage and improves compliance with internal purchasing policies, as contracts must be routed to and approved by the relevant stakeholders.
Centralize contract management and improve visibility
A renewal management tool allows you to centralize the entire contract management process.
All contracts are stored in the same central hub, reducing the time required for procurement audits or reviewing existing contracts as a renewal approaches.
Additionally, with all contract and renewal management in a centralized location, procurement leadership gains increased visibility of the process with improved reporting accuracy.
Cut costs and reduce SaaS shadow spending
Enhanced visibility into SaaS spending and contract renewals allows you to cut costs by:
- Identifying opportunities to forego renewals
- Consolidating licenses to eliminate overlapping SaaS spend
- Renegotiating contracts before they renew
Vendr: The SaaS buying platform for managing renewals
The most effective SaaS contract renewal management processes are part of a broader approach to software vendor management.
With Vendr, ambitious procurement teams can leverage features like:
- Automated upcoming renewal reminders
- Price benchmarking data from the biggest data set of SaaS purchasing transactions in the game
- Customizable contract approval processes
- Overlapping spend identification to fuel cost-cutting initiatives
- Support from a team of SaaS buying experts to source suitable vendors and drive renewal conversations