SaaS Management

  • 10 min read

SaaS Renewal Management: A Guide to Optimize SaaS Renewals

Rohit Rao

10th October, 2023

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An organization's financial stability is just like a puzzle, with each piece representing a vital aspect of its SaaS budget. Unfortunately, one piece that often goes overlooked but holds immense significance is SaaS renewal management. When your IT team neglects this crucial process, it often results in SaaS budget leakage, which quietly drains your financial resources. 

So, to maintain your organization's SaaS budget and prevent potential SaaS wastage, it is essential to put more emphasis on effective SaaS renewal management. 

With the growing number of SaaS apps, it has become more complex for IT teams to manage SaaS renewals. Even the slightest mismanagement during the SaaS renewal process can drain dollars and dollars of the company. So, to address this rising concern, the best solution is to implement SaaS renewal management effective strategies. But what exactly is SaaS renewal management? 

What Is SaaS Renewal Management?

SaaS renewal management involves a series of processes and strategies that are put together in place to effectively manage the continuation, cancellation, and renegotiation of SaaS contract terms/subscription terms. Furthermore, it plays a crucial role in helping your IT/procurement teams minimize SaaS expenditures by implementing SaaS renewal strategies.

Also, SaaS renewal management aims to ensure that companies are well-prepared to take the necessary steps when the renewal date approaches rather than being caught off guard by renewal dates. That’s not all there are other benefits as well of SaaS renewal Management, which we have discussed below.

Benefits of SaaS Renewal Management

Here are some advantages that you will avail if you effectively manage SaaS renewals: 

• Cost Optimization: SaaS renewal management plays a crucial role in helping your team optimize their software spending. By tracking and managing renewals effectively, businesses can avoid unnecessary renewals, eliminate redundant subscriptions, and negotiate better pricing or terms with vendors, ultimately saving money.

• License Compliance: It ensures that an organization maintains compliance with its software licenses. This prevents unintentional overuse or underuse of licenses, which can lead to legal issues or wasted resources.

• Budget Maintenance: With effective renewal management, your team can plan their IT budgets more accurately. They can forecast upcoming renewal costs and allocate funds accordingly, reducing financial surprises.

• Reduces The Risk of Interruption In Flow Of Work: SaaS renewal management reduces the risk of service interruptions. By ensuring that subscriptions are renewed on time, your team can avoid disruptions to critical software services, which can impact productivity and operations.

• Optimized Software Stack: It allows your team to reassess their software stack regularly. They can evaluate the effectiveness of existing SaaS applications and make informed renewal decisions about whether to renew, replace, or add new software to their stack to better meet their evolving needs.
  
  Now that you are familiar with what exactly SaaS renewal management is and what are its benefits, we should proceed further and prepare your IT team for the SaaS renewal process. 

How To Prepare Your IT Team For SaaS Renewal Process 

The modern enterprise uses a variety of SaaS applications, each with its own renewal date, terms, and conditions. So, managing renewals of multiple SaaS tools can be a challenging task. However, by following the key pointers outlined below, your IT team will be well-prepared to effectively manage the SaaS renewal:

• By Providing Them With Complete Visibility Into SaaS Stack

Without proper visibility into existing SaaS stack, automatic renewals may occur even for applications which are not actively used or not used at all, which further also takes away the opportunity for rightsizing to a suitable plan or cancellation. So, the first step is to gain full visibility of all SaaS stack. But how will your IT team achieve that? You can opt for a SaaS management platform like Zluri. 

This particular SaaS solution provides a data discovery feature that enables your IT team to gain complete visibility into your organization’s SaaS stack. Your team can seamlessly detect redundant and duplicate applications, which apps are used, what features of a particular application are in use, and more.

For example, you hired 2 new employees, Mark and Sally, for the finance department. Mark was assigned the task related to accounting and reporting, whereas Sally was assigned the financial planning task. Both employees were given access to 3 different apps: Slack for communication, Netsuite for accounting, and Planful for financial planning.

Now, Mark and Sally both were using Slack, but Mark was using Netsuite more actively meanwhile, Sally was using that tool for a while, and later, he stopped using it completely. Sally was more actively using Planful to plan the budget, and Mark didn't use it at all since he didn't need it for his allotted tasks. 

So, in this situation, for one person, Netsuite is redundant, and for another, Planful is not required. Tracking these redundant applications can be quite difficult for the IT team as they have to manage 100s of apps in the organization. And unintentionally, they lose track of who is actively using which applications. 

So what Zluri does is provide your team with complete details of which users have not actively used that particular application in the last 30 days. With these curated details, your team can easily detect which app licenses are not being used by users. Accordingly, they can reassign those licenses or suspend that app license, preventing SaaS wastage. 

Not only that, with the help of Zluri’s data discovery engine, your IT team can easily discover how many applications are there, and evaluate their actual SaaS usage and the number of licenses being paid for all from a centralized dashboard. This way, they don’t have to go back and forth to check the app license-related data, saving productive time and effort. 

• By Letting Them Use Renewal Calendar & Set Alerts To Stay Up-To-Date On Renewals

SaaS contracts may have different renewal dates, making coordinating and managing renewals challenging. So, to ensure your IT team is notified about upcoming renewals on a prior basis, Zluri offers an advanced renewal calendar feature. 

With the help of this feature, your IT team automatically gets alerts on renewal updates or upcoming renewals 3 months well in advance and also provides all the details related to license cost. 

For example, in November, Grammarly, Albacross, A Prompt, and other renewals are coming.  

This leaves your team with enough time to make informed decisions on renewals regarding which licenses to continue with, whether to upgrade or downgrade the plan and more.

For instance, Zluri provides your team renewal alerts for the upcoming Zoom application renewal date well in advance (3 months prior). With the help of this advance notice, your team takes a well-prepared approach, promptly assessing the current situation. They evaluate the number of licenses in use and examine whether any changes have occurred, such as new users joining or employees departing the organization.

They discovered that there are presently 10 licenses for Zoom. However, with Zluri’s discovery feature, your team identifies that two users have recently left the organization, and their licenses are no longer in use. With this updated data, your team can decide to right-size the license by removing two unused licenses. This way, you will pay only for the licenses that are being used, not the unused ones.

So, by getting notified well in advance, your team can make cost-saving decisions and optimize the licenses in the best possible way. 

However, Zluri is not restricted to that. Your team can further manually set the notifications for their convenience to prioritize the crucial renewals, providing your IT team ample time to review each SaaS application, its terms, and usage patterns.  

Note: With Zluri, by default, your IT team will get renewal alerts for contracts 30, 15, 7, and 1 days prior to renewal, and for payments, you get 7 and 1 days prior to renewal. 

• Prioritize Important Renewals

• Prioritization is a key element of a proactive renewal process. Your IT team needs to understand that not every SaaS application holds equal importance for the business. When dealing with numerous renewals, it's essential to prioritize those with higher value and greater optimization potential. 

• So, what Zluri does is it provides your IT team with insights into contract value and the proximity of the renewal date. With the help of these data, your IT team can effectively prioritize the renewals. For example, the closer the renewal, the more urgent the action required.
  
  Now that you know how your IT team can effectively manage SaaS renewals, let's dive deeper and explore different ways through which your IT team can optimize and simplify the SaaS renewal process. 

4 Effective Ways To Streamline SaaS Renewals Management

Listed below are the 4 effective ways that your IT team can implement to streamline SaaS renewal management:

1. Categorize Your SaaS Renewals To Avoid Any Confusion 

To efficiently manage SaaS renewals, your team can categorize renewals into predefined groups with Zluri. At first, Zluri detects all the applications in use and further provides your team with insights into app usage, redundant and duplicate apps, and more. With the help of these granular data points, you team can decide which license will fall under which category, for example:

• Replacing the application- Once your IT team has a clear view of the SaaS stack landscape, they can assess whether certain applications need to be replaced. This evaluation involves considering factors such as:

• Outdated or inefficient apps: Identifying applications that are outdated or no longer meet your organization's requirements.

• Redundancy: Determining if multiple applications serve similar purposes, leading to potential consolidation.

• Compatibility: Assessing whether applications are compatible with the updated operating systems and security requirements.
  
  So by replacing these outdated or redundant applications your team can reduce costs and enhance security.

• Eliminating the application- Zluri also helps in the process of eliminating unnecessary or unused applications. Your IT team can identify applications that are no longer actively used by employees or are redundant. Eliminating such applications can free up resources and reduce licensing costs.

• Renegotiating pricing before renewal- Zluri's expert’s insights enable your IT team to negotiate pricing and licensing agreements with software vendors before the renewal period. Armed with data on usage patterns, your team can effectively negotiate, potentially securing better deals or discounts.

• Renewing the application- Lastly, when all your checklist is met, your team can further renew the licenses.  

2. Look For The Auto-Renewal Clause

Since most SaaS renewal contracts operate on a subscription basis, vendors expect you to renew the contract after the first cycle. In most cases, vendors provide a specific renewal window during which you can decide whether to cancel or switch to a different license type. However, if this renewal window is missed, the SaaS contract usually auto-renews. 

So, if you intend to discontinue a particular app subscription but miss the renewal date, it will automatically renew, and you'll be obligated to pay for another full subscription cycle. 

To tackle this situation effectively and gain better control over SaaS subscriptions, your IT team needs to eliminate the auto-renewal option. Once you discontinue auto-renewals, your IT team will be able to manage renewals manually. But what benefit will you avail from doing so? When you specify that your contract cannot auto-renew, it places more importance on both parties to initiate renewal conversations.

By disabling auto-renewals, you prompt your vendor to contact you well in advance to discuss the contract renewal. And they also ensure that you renew because failing to do so means a loss of revenue for them.

Similarly, you gain a sense of urgency to prepare for upcoming/future renewals. Because failing to organize software renewals in advance can result in your team losing access to essential apps crucial for your daily business operations. 

Therefore, disabling auto-renewal clauses ensures that both parties actively engage in the renewal process, fostering better communication and preparation.

3. Evaluate SaaS usage

Paying for unused SaaS app licenses is a situation every organization wants to avoid. But, with the increase in SaaS adoption, shadow IT (employees using unauthorized software) is rising. Because managing a large number of SaaS applications can be daunting, and it's easy to lose track of who is using which app and whether it's being utilized at all.

This is precisely why, before committing to the renewal of any SaaS application, it's crucial to identify all the apps in the SaaS stack and evaluate its actual usage, and then compare it to what you're spending. By doing so, your IT team will not only be able to streamline the SaaS renewal management process but can simultaneously halt unnecessary expenses related to unused app licenses.

For example, your IT team subscribes to a project management tool, and you've been renewing the license annually without much thought. Your team initially used the tool actively, but over time, they started using it less frequently. Without regular evaluation, it can be difficult to recognize this decline in usage. And, you will continue renewing the license at its full cost even though only a fraction of your team is actively using the tool.

So, what can be done to prevent such a situation? Before the renewal date arrives, with Zluri, your IT team can evaluate the actual usage of the project management tool. It will provide your IT team with insights such as which employee is no longer using the application and how long they have not actively engaged with it. 

Armed with this information, your IT team can adjust the subscription by reducing the number of licenses to match the actual user base at the time of renewal. As a result, you significantly cut down on unnecessary expenses, ensuring that you're only paying for apps that are actively used by your employees and add value to your organization.

4. Use Price Benchmarking As A Key Point During  Contract Renewal Discussion With Vendor 

Don't proceed with SaaS contract renewals without conducting a thorough competitive landscape analysis.

While your team may have performed this market analysis during initial vendor selection, it's crucial to recognize that pricing standards may have changed considerably during your contract's duration.

Naturally, you wouldn't want to invest months gathering competitor pricing data, particularly if your primary objective is renewal rather than changing providers. 

So, instead, you can use price benchmarking information to gain insight into what other organizations are paying for the same product. 

But gathering all this information for negotiation purposes can be a task, so to simplify the process, what Zluri does is, it allocates a dedicated team of experts to negotiate the best possible deal on behalf of your team while renewing your SaaS license subscription/contract. 

These experts utilize negotiation techniques such as ZOPA (Zones of Possible Agreements) and BATNA (Best Alternative to a Negotiated Agreement).

ZOPA (Zones of Possible Agreements): To help you understand better how ZOPA works, let's assume an instance. Suppose it's time to renew Zoho Projects's license, and you have a set budget of $400 for this particular application. The last time you renewed this contract was 24 months ago, so there are chances that there can be a change in license pricing. 

Therefore, prior to renewal, you conducted market research and found that various vendors are now offering Zoho Projects's licenses within a price range of $350 to $450. In this scenario, the ZOPA represents the difference between your spending limit and the vendor's price range ($350 to $450) in the market.

With this information, Zluri's experts can confidently negotiate on your behalf, aiming to secure the Zoho license at a price closer to $350 while ensuring the vendor still earns a profit.

BATNA (Best Alternative to a Negotiated Agreement: This is another strategy used by Zluri’s experts. They compare the pricing of app licenses offered by multiple vendors. If the desired vendor agrees to the negotiated price, which falls under your budget, then these experts will grab the offer, and if they don't agree, then they will choose the best alternative vendor who offers a better deal at a better price. 

So, according to your buying power with Zluri’s SaaS buying capabilities, you can procure app licenses for the best prices and save a lot of money, which can be utilized in other core activities. 

In conclusion, Zluri is the go-to solution for organizations aiming to optimize their SaaS renewals effectively. With advanced features like data discovery, renewal calendar, negotiation expertise, and more, Zluri empowers IT teams to make informed decisions on renewals, minimize SaaS expenditure, and enhance financial health. 

So, what are you waiting for? Book a demo now to witness firsthand how it helps streamline SaaS renewal management.

About the author

Rohit Rao

Rohit works in the Community and Marketing Team of Zluri and is a strong advocate of community led growth.