SaaS Contract Renewal: Challenges, Process and Expert Tips in 2023

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min read time
July 11, 2023
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SaaS applications have become the driving force of modern businesses, providing flexible and scalable solutions.

Gartner predicts that more than half of all enterprise IT spending will shift to the cloud by 2025.

Even though SaaS applications are easy to use, managing them, especially the contracts, can be a daunting task. Most organizations still use spreadsheets to track their SaaS contracts, resulting in missed renewals and increased spending.

For organizations to remain ahead of the curve, you have to streamline SaaS contract renewals and keep your spending under control.

From simplifying the SaaS renewal process to providing professional advice on negotiation tactics, contract optimization, and vendor management, this article will help you understand the complexity of SaaS contract renewals and how to manage them effectively.

SaaS contract renewal - The major challenge

When it comes to contract renewals, businesses face various challenges:

  • Managing hundreds of contracts with spreadsheets is time-consuming and error-prone.
  • Risk of sensitive documents getting lost, leading to privacy breaches and security concerns.
  • Manual contract tracking results in limited visibility and missed renewal dates.
  • Auto-renewals often result in missed negotiation opportunities and excessive costs.
  • Lack of a centralized system and manual processes impede collaboration, waste time, and result in inefficiencies.

We’re midway through 2023; it's time for you to get rid of spreadsheet-based contract management and switch to a robust contract management system.

A contract management system will provide a solution to your contract-related issues. As a matter of fact, implementing management software provides enterprises with centralized visibility, faster procedures, proactive notifications on renewals, and data security.

Image of centralized contract management feature

Automated workflows help organizations renew their contracts on time, provide negotiation opportunities, and enhance overall contract management efficiency.

So, the key to overcoming your SaaS contract renewal challenges is to use a contract management platform and automate contract renewals.

Click here to learn how to stay ahead of SaaS renewals →

The SaaS renewal process checklist for buyers

For the buyer, the SaaS renewal process is a seamless transition to maximizing value from the SaaS stack.

1. Analyze App Usage

First, evaluate the performance, functionality, and user satisfaction of the current SaaS product in order to negotiate better terms and minimize needless spending.

2. Match the Terms of the Contract with the Business Needs

Go through the renewal terms - pricing, contract length, and any adjustments to SLAs. Check if they are in line with your usage to avoid penalties.

3. Create a Vendor Renegotiation Strategy

Based on the usage insights, create a thorough negotiation strategy that includes unused licenses, price benchmarks, scope of the applications, and more.

4. Prepare a Plan B

Look for other suppliers who can give you extra negotiating leverage and choices in case negotiations with the existing one do not go as expected.

5. Use Automated Workflows

With automated workflows, you can receive timely alerts and reminders for upcoming renewals, allowing you to make informed choices and avoid unnecessary costs associated with auto-renewal.

Image of Contract renewal workflow

Say goodbye to manual tracking and never miss a renewal again. Consider adopting a SaaS renewal management system like CloudEagle to simplify your SaaS renewal process.

6. Negotiate Consumption-Based Pricing

Engage in an open discussion with the vendor to negotiate contract renewal conditions, such as pricing, contract duration, and any desired adjustment or upgrade.

How to prepare for SaaS contract renewal

Preparing for the software renewal process requires significant planning.  A comprehensive approach with informed decisions that comply with evolving needs may ensure a seamless procedure.

Here are the important steps to preparing for a SaaS contract renewal:

1. Cancel Automatic Contract Renewals

As per a study by G2, 69% of software contracts have an auto-renew clause.

Start by evaluating your contracts. Without sufficient assessment, automatic software renewals can end up with unwanted extensions and cost liabilities.

If you no longer need a certain SaaS application or are planning to renegotiate the contract, it is critical to stop automatic renewals well in advance.

2. Review Renewal Terms and SLAs

Carefully analyze the software renewal terms and conditions of your contract.  Align price structures, contract lengths, and service-level agreements (SLAs) with your company's ongoing needs. Renegotiations on these terms are required to achieve a mutually beneficial agreement with the vendor.

3. Understand Application Usage and Requirements

Assess the usage of your SaaS applications: Are they being completely utilized? Are any of the SaaS apps or features underutilized? Has any new requirement arisen since the initial contract?

Image of application usage dashboard

Understanding the application's use and your needs will help identify areas that may require changes or upgrades.

4. Analyze Vendor Performance and Support

Evaluate your SaaS vendor's performance during the existing contract period: their responsiveness, dependability, and customer support, with a close look at uptime, response times, and your team’s happiness. This analysis helps determine whether their continuing partnership is beneficial.

5. Shortlist Potential Alternatives

Research and identify viable SaaS substitutes that better match your ongoing requirements. Assess functionality, scalability, cost, and feedback from customers. Shortlisting alternatives allows you to have a backup plan in case the current vendor fails to satisfy your needs or if there are better choices in the market.

How to ensure a smooth SaaS renewal process?

According to an article by CFO, 90% of buyers are overpaying for SaaS products by as much as 20-30% due to improper negotiation.

Ensuring a seamless SaaS renewal process is critical to retaining a productive relationship with SaaS providers and optimizing the value of investment.

You can easily handle the SaaS renewal process if you follow these crucial steps:

1. Stay ahead of contract renewals with workflows

Implement workflows that automate the SaaS renewal process. Set up reminders and alerts well in advance of the renewal date to allow for adequate preparation and negotiation, based on the analysis of usage details.

Image showing the benefits of using workflows

An automated workflow helps with staying organized, avoiding last-minute decisions, and ensuring a smooth and efficient renewal procedure.

2. Start negotiating early

Plan ahead. With enough time to analyze usage and determine any changes in the SaaS subscription, early negotiations become one of the best strategies for smart SaaS renewals.

Backed by a proper assessment of the effectiveness of your applications, early negotiations also provide you with more bargaining power on price and contract terms.

3. Leverage collected data during negotiations

Utilize insights gathered on your SaaS consumption, performance, and return on investment to formulate data-driven arguments for contract negotiations.

For example, if you can demonstrate unused features or limited customer uptake, you may be able to negotiate lower pricing or a modification in the service offering.

4. Use competitive quotes to persuade vendors

Presenting competitive bids from other SaaS vendors  can encourage your current vendor to offer better terms or prices. It shows that you are actively looking at alternatives and fosters competitive pricing. Prepare to bargain with multiple vendors to secure your success.

5. Use your growth potential to close the deal

During discussions, emphasize your company's growth trajectory. Highlight how your continued relationship will benefit the vendor through increased usage, referrals, or prospective upsells.

This tactical strategy can give you an edge in negotiating more favorable conditions and a mutually beneficial contract.

How to ace contract renewal negotiations with CloudEagle

CloudEagle is a complete SaaS management platform that can help you ace your SaaS contract renewals. With its powerful integration capabilities and stellar features, you gain complete visibility into your SaaS stack, manage contracts easily, track renewal dates, and use experienced negotiating services to optimize your SaaS spend and maximize savings.

Image of CloudEagle dashboard

Here’s how CloudEagle can help you efficiently manage renewal negotiations.

Utilize Integrations for 100% Visibility: CloudEagle can give 100% insight into your SaaS apps thanks to 300+ direct integrations.

Use SSO, finance, HRIS, and direct integrations to collect high-level, detailed consumption statistics, such as application usage, user data, and license utilization. This information can be leveraged in negotiations.

Contract Management: It removes the need for spreadsheets and manual records and ensures that no contracts are missed. CloudEagle's contract management feature unifies all your SaaS contracts in one convenient location.

Organize and extract important contract information, such as renewal and expiration dates, and contract amounts and streamline contract management.

Image of contract details

Renewal Calendar and Workflows: CloudEagle organizes all application-related data and generates a renewal calendar based on contract dates. Set up workflows to send reminder emails and prepare for renewal negotiations. The workflows activate 90 days before the renewal date.

Seamless Renewal Process: The distinctive CloudEagle platform escalates the SaaS renewal process and alerts important stakeholders through Slack, email, and in-app notifications until somebody acts and renews the contract.

Assisted Buying: If your team lacks the time or experience to negotiate, CloudEagle provides on-demand expert negotiators. These buying assistants use their vast understanding of the SaaS industry and vendor practices to negotiate favorable terms on your behalf.

CloudEagle's negotiators also streamline your negotiations for contract renewal. The team uses your application consumption statistics to remove unused licenses without falling into upselling traps, resulting in considerable SaaS savings.

Here’s how Falkonry automated their contract renewal process with CloudEagle:

Check out our customer stories →

Do you want to streamline your contract renewal process and focus more on strategic tasks?

Frequently asked questions

1. What are some practical ways that can help one maximize a SaaS contract renewal?

Here are some that can help you maximize your SaaS contract renewals;

  • Evaluate usage, ROI, and vendor performance.
  • Analyze contract terms and negotiate based on data.
  • Consider alternative options.
  • Use automation for timely reminders and alerts.
  • Align contracts with business needs.
  • Optimize pricing and SLAs.
  • Ensure a smooth transition and maximize value.

2. Is there a quick checklist for what to look for when reviewing a SaaS agreement?

Here is a quick checklist of what one must see while reviewing their SaaS contract

  • Start and end dates
  • Access rights and users
  • Customer support and services
  • Data ownership
  • SaaS subscription/renewal notice period
  • Total SaaS contract value
  • Consumption metrics
  • Service Level Agreement
  • Data handling and regulatory compliance
  • Termination policy

3. What is SaaS renewal strategy?

A SaaS renewal strategy is an actionable plan for successfully managing Software-as-a-Service (SaaS) subscription renewals.

To ensure value, negotiating favorable terms, and managing costs through the SaaS renewal process, it requires proactive planning, contract analysis, vendor evaluation, budget optimization, and alignment with corporate objectives.

Written by
Prasanna Naik
Co-founder, CloudEagle
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