Getting caught in auto-renewals is not a new thing, as most of us have faced a similar situation once in our lives.
While not all auto-renewals are wrong, some can be frustrating, especially when you don’t want that subscription to continue. Forgetting to cancel auto-renewals of streaming platforms won’t have heavy financial implications, but the same rule doesn’t apply to SaaS renewals.
Organizations pay hundreds and thousands of dollars monthly for a single license on a single SaaS application. They need to effectively track them to avoid falling behind, leading to huge financial drift.
However, there is an easy way to stay ahead of renewals; we’ll reveal it in this insightful read.
This SaaS renewal playbook equips business owners and industry leaders with a systematic approach to maximizing the value derived from SaaS investments, from the foundational pre-renewal phase to the post-renewal phase.
What are SaaS Renewals?
SaaS renewals are when you extend a Software as a Service (SaaS) subscription after its initial period ends. Users or organizations can renew monthly or annually, paying to continue accessing the software. Renewals may include updated terms, pricing, and improvements made since the last subscription period.
The SaaS renewal rate is the overall percentage of businesses or subscribers who renew their SaaS subscription after the term has ended.
Most modern companies consider monthly subscription plans for their SaaS tools. This gives you the flexibility to cancel at any point in time. Only 25% of organizations are active enough to renew or cancel their subscription before expiration. In some organizations, the contract might get auto-renewed due to a poor renewal tracking approach.
So, how do you stay ahead of renewals, renew contracts on time, and be among the 25%?
SaaS Renewal Playbook That You Must Follow
Pre-Renewal Phase
The first step of the SaaS renewal playbook is the pre-renewal phase. This is where you will discover all the SaaS applications across different sectors of your business.
1. Inventory and Assessment
Efficient management begins with a comprehensive inventory and assessment. Understand all the essential factors of your existing subscriptions to know which ones cost how much money.
You also need to identify the critical software assets and their renewal timelines. This way, you will have a detailed map of the overall applications, which will help you make informed decisions in the upcoming renewal process.
A. Staying ahead of auto-renewals with workflows
Navigating through the processes of the pre-renewal phase takes work, especially when you start discovering subscriptions you don’t use anymore.
Staying ahead of auto-renewals through well-designed workflows is imperative to prevent any problematic situation from arising. You cannot manually track all renewals. In this case, workflows will be super-helpful by sending automated renewal reminders.
When you establish streamlined processes, you will be able to ensure that no SaaS renewal goes unnoticed, preventing potentially costly extensions. Workflow efficiency is the key to maintaining control over your SaaS portfolio.
B. Preparation with a SaaS Management Platform
Investing in a robust SaaS spend management solution is a strategic move for adequate pre-renewal preparation. Businesses that neglect the importance of having a SaaS management platform in the pre-renewal phase face numerous problems.
A SaaS management platform can provide centralized control, allowing you to monitor subscriptions, track usage, and receive timely alerts. This proactive approach enhances your ability to make data-driven decisions during renewal.
However, pay close attention while choosing a SaaS management software for your business. They can make or break your SaaS renewal strategy.
Managing software renewals can be time-consuming, often leading to missed deadlines, unexpected costs, and business disruptions.
CloudEagle's automated renewal workflows eliminate these headaches, injecting predictability and efficiency into your SaaS ecosystem. Through proactive reminders, automated notifications, and seamless integration with vendor platforms, CloudEagle ensures you stay ahead of your SaaS renewals.
C. Analyze Usage for Cost Optimization
Consider software usage within your organization. You need to analyze their usage thoroughly to make a data-driven decision about their usage frequency and their limit.
When you understand the utilization patterns of each subscription, you can come up with precise cost optimization.
By aligning your actual usage with subscription costs, you can identify redundancies and underutilized resources, ultimately creating substantial SaaS renewal savings opportunities.
D. Review Contract Terms
A thorough review of existing contract terms is critical in the pre-renewal phase. Apart from scrutinizing contract details, paying close attention to renewal clauses, pricing structures, and potential penalties is best.
Thanks to this comprehensive approach, you can ensure that you’re entering negotiations with a clear understanding of your contractual commitments and potential negotiation points.
This detailed pre-renewal process will provide your organization with the knowledge and tools to approach the SaaS renewal playbook strategically.
2. Negotiation Preparation
Negotiation preparation is one of the most critical aspects of the pre-renewal phase. After determining the usage of a tool and its contract terms, you can determine if they benefit your business. You need to negotiate SaaS contracts with the vendors properly.
You must prepare for the negotiation if you plan to continue with the specific tool. You must remember that there will always be room for negotiation if you know the correct approach.
Here are some key clauses you must negotiate in a SaaS agreement.
A. Data-Driven Insights
A negotiation wouldn’t be fruitful without comprehensive, data-driven insights. Utilize analytics and reporting tools to gather precise information on software usage, user engagement, and performance metrics.
These insights are super helpful as they will help you understand the value derived from each subscription. This is an important SaaS renewal sub-step you should remember.
With this data, negotiations will shift from subjective discussions to objective, fact-based conversations. As a result, you can negotiate from a position of strength. Don’t forget to know the essential things before negotiating SaaS agreements.
B. Identify Leverage Points
To negotiate effectively, identifying leverage points within your SaaS portfolio is imperative. Leverage points could range from the criticality of particular software to your organization's overall subscription volume.
With the leverage points, you can get more information about the software. You will know how much your company and employees depend on that software.
Pinpointing these factors effectively allows you to negotiate concessions, discounts, or additional services. Don’t forget to understand where your negotiation power lies to extract maximum value from your vendor relationships.
Conduct market research identify price benchmarks, and have a clear set of alternative bids to leverage during negotiations to persuade vendors.
C. Define Renewal Goals
Approach negotiations with clarity by defining specific renewal goals. Outline what success looks like for your organization in the context of each renewal.
This could include cost reductions, enhanced service levels, or additional features. When you clearly articulate your renewal goals, your negotiation team will have a focused agenda.
Consequently, they can streamline the negotiation process and increase the likelihood of favorable outcomes.
This meticulous negotiation preparation process positions your organization to navigate the complexities of SaaS contract renewals confidently.
During Renewal Phase
Now that you know what to do in the pre-renewal phase, it’s time to cover what you need to remember for the SaaS renewal playbook.
In this phase, executing strategic renegotiation becomes pivotal for optimizing costs and ensuring the alignment of SaaS subscriptions with organizational needs.
1. Renegotiation Strategies
Keep in mind that your focus will be shifted to renegotiation strategies here. This involves a comprehensive approach to enhance your SaaS portfolio's efficiency and cost-effectiveness.
Additionally, you also need to take adequate measures to ensure that both parties are satisfied with the negotiation process.
A. Right-Size Licenses Based on Usage
Precision is key when it comes to right-sizing licenses based on usage. Evaluate the actual utilization of each software within your organization, matching subscription levels to actual needs.
Sometimes, business owners don’t know how much they will use a specific tool. For instance, they purchase the more expensive enterprise plan when their work can be done with a lower plan.
By aligning licenses with usage patterns, you avoid unnecessary costs associated with over-licensing. This will maximize the value derived from each subscription, ultimately enhancing the effectiveness of the SaaS renewal playbook.
B. Leverage Price Benchmarks and Alternatives
A strategic approach involves leveraging industry price benchmarks and exploring alternative solutions.
Benchmarking ensures that you are paying a fair market price while exploring alternatives allows you to assess whether more cost-effective options are available.
Benchmarking will also help you with the current market value and if you have been overpaying this entire time. This dual strategy provides valuable context for negotiations, empowering you to secure favorable terms.
C. Remove Duplicates
One of the most important things business owners need to do is remove duplicate applications. The renewal phase is the perfect opportunity to declutter your SaaS portfolio by identifying and removing duplicate subscriptions.
This process not only eliminates unnecessary costs but also streamlines your software ecosystem. Apart from enhancing operational efficiency, you may also know the primary reason for negative cash flow.
A thorough audit of subscriptions prevents redundancy, promoting a lean and optimized SaaS renewal playbook management.
D. Renegotiate Crucial Clauses
Go through the renewal phase with a focus on renegotiating crucial contract clauses. This could include revisiting terms related to pricing, service levels, and exit conditions.
When you address these key clauses, you tailor your SaaS agreements to suit your organization's evolving needs better, ensuring that your subscriptions remain aligned with strategic objectives.
CloudEagle comes with the Assisted Buying feature. This cloud cost management tool helps businesses save money on their cloud spending.
When you choose this feature, a dedicated team of experts will work as an extended part of the customer's team and negotiate with vendors if your team lacks bandwidth. These experts can take over the renewal renegotiation process and secure the best deals.
Some of the key features of CloudEagle's Assisted Buying feature include:
- Benchmarking data: CloudEagle provides businesses with benchmarking data showing how their cloud spending compares to other businesses in their industry. This data can help businesses identify areas where they can save money.
- Cost optimization recommendations: CloudEagle provides businesses with cost optimization recommendations to help them save money on their cloud bills.
With CloudEagle’s Assisted Buying feature, businesses save up to 30% on their cloud spending.
2. Contract Amendment and Execution
Your primary focus will be on the critical steps of amending and executing contracts. This phase involves a detailed review of the terms, followed by the formal signing and documentation process.
A. Review Terms
Review the contract terms thoroughly for the best contract management options. This is the only way to ensure the renewed agreement aligns with your organization's objectives.
Scrutinize pricing structures, service-level commitments, renewal terms, and any clauses that may impact your organization's flexibility. This thorough examination safeguards against unforeseen issues and provides a clear understanding of the renewed contractual obligations.
B. Sign and Document
With a comprehensive understanding of the reviewed terms, the next step involves the formal signing and documentation of the renewed contract.
Don’t neglect the importance of involving all the stakeholders in the renewal process. Furthermore, cross-check to see whether agreed-upon terms are accurately reflected in the final document. This phase is critical for establishing a legally binding SaaS agreement checklist that protects both parties' interests.
Post-Renewal Phase
Last but not least - post-renewal phase. This is the last phase of the SaaS renewal playbook journey, where you will keep up with the renewal calendar.
After you renew the SaaS licenses, you must ensure continuous SaaS license management and contract management are in place.
1. Monitoring and Optimization
Proper monitoring and optimization are imperative factors in the post-renewal phase. Let’s discuss this in detail.
A. Continuous Monitoring and Automation
Implement a robust system for continuous monitoring and automation. This will help you stay informed about the performance and usage of your SaaS subscriptions.
You can also leverage the benefits of automation tools for your SaaS renewal playbook. These tools are effective at providing real-time insights and enabling proactive decision-making.
This is where CloudEagle presents a sophisticated solution. CloudEagle provides real-time visibility into every facet of your SaaS portfolio.
You will gain instant access to a comprehensive inventory of your apps, licenses, and user entitlements. This transparency empowers informed decision-making, allowing you to identify consolidation, rationalization, and cost-optimization opportunities.
CloudEagle will also proactively remind you of upcoming renewals, enabling you to confidently negotiate the best deals or explore alternative solutions.
B. Identify Redundancies
Utilize the post-renewal phase to identify and eliminate redundancies within your SaaS portfolio. Failing to identify the redundancies will negatively affect your SaaS portfolio.
However, when you monitor continuously, you can spot underutilized or duplicate subscriptions that may have emerged since the renewal.
Addressing these redundancies timely not only optimizes costs but also streamlines your software ecosystem for enhanced productivity.
C. Renegotiation or Cancellation
Based on the findings and information from continuous monitoring, be prepared to renegotiate or cancel subscriptions as needed.
If a particular software is underutilized or no longer aligns with your organizational goals, renegotiation or cancellation ensures you only pay for what you truly need.
This strategic approach positions your organization for ongoing cost savings and a streamlined software environment.
The post-renewal phase serves as a dynamic checkpoint, enabling your organization to adapt to evolving needs and maintain optimal efficiency in its SaaS ecosystem.
2. Documentation and Feedback
The documentation and feedback phase extends beyond renewal, providing a structured framework for continuous improvement.
A. Document Changes
The first step in this phase involves documentation of changes made during the renewal and post-renewal phases. Record alterations to subscription levels, contract terms, and any renegotiations.
This documentation not only serves as a historical reference but also aids in future decision-making processes by providing insights into the evolution of your SaaS portfolio.
B. Harness Unused Licenses
Efficiently manage your software resources by actively harnessing unused licenses. Identify subscriptions that remain underutilized despite optimization efforts.
SaaS management platforms like CloudEagle are equipped with license reclamation workflows that will deprovision users from licenses due to low usage and harness it so you can reallocate or right-size them.
Redistributing or repurposing these licenses will allow your organization to maximize the value derived from each subscription. As a result, you can ensure that resources are allocated effectively.
C. Gather Feedback
Encourage feedback from key stakeholders involved in the renewal process. Collect insights from end-users, procurement teams, and IT departments.
Understanding the experiences and challenges faced during the renewal phases provides valuable input for refining your SaaS renewal playbook strategy.
This feedback loop contributes to continuous improvement, allowing your organization to adapt and optimize its approach to future renewals.
Conclusion
Navigating the complexities of the SaaS renewal playbook requires a data-driven, strategic approach. This 3-step SaaS renewal playbook equips you with the knowledge and tools to optimize costs, maximize value, and maintain a lean and efficient SaaS ecosystem.
The primary goal of SaaS renewal management is to develop a repeatable process for your business where you can communicate thoroughly with the key stakeholders in your organization.
If you want your business to save on SaaS spending and boost positive cash flow, CloudEagle should be your top choice.
With over $1 billion spending negotiation and $120M+ dollar savings, CloudEagle can help your business with SaaS management.
From saving the SaaS spend to time and money for every stakeholder, CloudEagle should be the go-to option for your organization.
Frequently Asked Questions
1. Why are renewals important for SaaS?
For SaaS businesses, successful renewals are strategic cornerstones. They secure recurring revenue streams to sustain the financial health. Renewals also present valuable opportunities for building deeper customer relationships, enabling upselling, cross-selling, and maximizing Customer Lifetime Value (CLTV).
2. What is the average renewal rate in SaaS?
If the SaaS renewal rate is above 80%, it will be considered healthy. Many successful SaaS companies have an average renewal rate of 90% or even 100%.
3. How is the SaaS renewal rate calculated?
You can determine the renewal rate by utilizing a bookings figure, which involves dividing the aggregate value of renewed contracts by the overall value of potential renewing contracts within a specific timeframe. The renewal rate is derived from the monetary value of renewal bookings divided by the total monetary value of all renewing contracts.