SaaS Renewal Best Practices: Using Data to Optimize Negotiations

With organizations now using an average of 132 software applications – 89% of which are set to auto-renew – tracking SaaS renewals isn’t optional; it’s essential.

The problem is, many companies lack the visibility needed to effectively manage renewals – an oversight that comes at a steep price.

Accounting for 42% of total software spend, and with more than half triggering price increases, auto-renewals are often a silent drain resulting in huge financial wastage.

But with oversight, time, and insights, this doesn’t have to be the case – especially when you leverage data-driven SaaS renewal best practices.

Here’s exactly how data can be utilized to influence the outcomes of SaaS contract negotiations.

Data-driven SaaS renewal best practices

Track usage vs license allocation ahead of SaaS renewals

One of the leading sources of SaaS wastage is over-licensing – paying for more seats, features, or for a higher product tier than teams actually require.

The issue is, most organizations simply have no way of identifying this waste. As a result, 66% of all software applications within the average company are now either unused or underutilized.  

Financially, this equates to more than $865,000 being wasted annually per company with between 100 and 500 employees, and more than $10 million for each enterprise business with a 10,000+ strong workforce.

As software prices continue to rise at a rate of 11.3%, this financial drain is unsustainable. As a company, you need to take the required steps to mitigate wasted spend – starting by aligning your license count with actual software usage.

1. Track usage data – Identify your tools that are either underutilized or entirely unused. Knowing exactly how many unrequired licenses are still being paid for is key to controlling spend.
2. Negotiate renewals based on usage – Use utilization data to negotiate agreements that better reflect your company’s actual needs. ‍
3. Terminate unused subscriptions – If a particular application isn’t providing enough value or is simply not being utilized, you may want to terminate the subscription altogether.

Benchmark vendor pricing

Software pricing not only lacks transparency, but it’s also notoriously inconsistent. Companies often pay wildly different prices for the exact same solution.

This lack of pricing transparency leaves buyers at a disadvantage, with no frame of reference on whether they’re being quoted a good deal, let alone the best possible deal.

It therefore comes as little surprise that 90% of companies are paying an average of 26% more than they could be for their SaaS tools. Factoring in the number of applications companies are now using, it’s easy to visualize the scale of potential wastage.

What compounds the pain is that this wastage is almost entirely preventable.

Or, at least it is when you have access to accurate vendor pricing benchmarks and can leverage them effectively.

• Obtain accurate vendor pricing benchmarks – While many SaaS management platforms will provide accurate, readily-accessible pricing benchmarks, the most reliable data is tailored to your organization’s unique needs and circumstances. Knowing exactly what companies of a similar size are paying for the same subscription you’re procuring provides critical leverage in negotiations.
• Scrutinize your contracts – Look at your existing contract in terms of pricing, discount structures, and payment terms, and compare them with benchmarking data to identify opportunities for optimization.
• Leverage benchmark insights in negotiations – Armed with pricing insights, you can enter into negotiation discussions with the necessary leverage. To secure the best possible outcome though, you may want to consider utilizing a Procurement-as-a-Service provider to handle negotiations on your behalf, as they will not only save you valuable time, but they also have a deep understanding of the vendors, market, and the levers to pull for the best results.

Here’s where you can access tailored benchmarking data, with further guidance on how to leverage it in negotiations

Forecast future needs based on headcount and growth plans

While many SaaS renewals often slip under the radar – leaving organizations paying for unwanted tools and usually with unfavorable terms – those that are renegotiated are not always done so with growth or changing business circumstances in mind.

This means that many contracts often lack the flexibility to scale with headcount, adapt to organizational change, or accommodate shifting priorities.

While you shouldn’t pay for unused or underutilized licenses, another SaaS renewal best practice is ensuring you’re planning ahead and negotiating flexible license tiers, usage-based pricing, or scalable contract terms that align with projected growth and change.

• Align renewals with hiring projections – Start renewal discussions early, aligning them with forecasted workforce changes to ensure contract terms reflect your future needs and avoid overcommitting to unused licenses.
• Build scalability into your contracts – You won’t always be able to predict growth or the potential need for cuts. Asking for pre-negotiated pricing bands tied to employee milestones or usage thresholds provides the flexibility to adjust without incurring hefty costs down the line.
• Track and benchmark your SaaS Spend per Employee – Not only is this a useful metric for budgeting and forecasting costs, but it can also help you identify inefficiencies, justify contract changes, and strengthen your position during renewals.

Use data to consolidate vendor overlap

One of the most common inefficiencies in SaaS spend is vendor overlap – when multiple software applications serve the same or similar purposes.

Vendor overlap not only drives up costs unnecessarily, but it is also a key contributor to underutilization across organizations. This issue is especially prevalent in development, security, sales, marketing, and collaboration & productivity software.

Leveraging usage data and having a centralized repository of all company SaaS applications can help identify redundancies, highlight opportunities for consolidation, and enable finance and procurement teams to make far more strategic renewal decisions.

1. Obtain full SaaS visibility – Gain a centralized view of your company’s entire SaaS stack to uncover hidden costs and inefficiencies. Invest in a platform that will not only enable you to discover all tools in use across the company – including shadow IT and shelfware – but will also flag instances of duplication and redundancy.
2. Review license utilization – Analyze usage data to pinpoint underutilized or unused licenses.
3. Consolidate or terminate applications – Eliminate redundancies by consolidating similar tools or terminating underperforming contracts.

Maximize the value of every SaaS renewal with Vertice

When it comes to making informed decisions ahead of your SaaS renewals, timing and intel are key.

At Vertice, we not only ensure you never miss a renewal, but we also identify cost-saving opportunities across your entire tech stack, while providing you with reliable, tailored vendor benchmarking data, giving you the leverage needed to secure the best possible deals on any contract.

Better still, we can negotiate on your behalf, saving you a substantial amount of time.

Why not see for yourself how we helped one company save 115 hours on contract negotiations in just three months, while helping another achieve average SaaS savings of 32%, including more than $155,000 on a single contract.

Alternatively, get a feel for Vertice in your own time by taking a self-guided tour of the platform.