What is software renewal management?
Aimee Manning | FEB 15, 2023
With the average organization now using as many as 110 SaaS tools, a number that is increasing 18% year-on-year, it’s no surprise that so many businesses are struggling to keep on top of their sprawling software stacks.
The problem is, this lack of oversight comes with huge financial implications. According to our own data, companies with 600 employees are wasting close to $1M in SaaS every year from underutilized tools alone — and with 89% of SaaS contracts now including auto-renewal clauses, this figure can very easily escalate out of control.
Unless you are tracking these scheduled renewals, that is.
Something that is only possible through effective software renewal management.
But what is software renewal management? And how can you use it to streamline your procurement process, avoid wasted SaaS spend, and negotiate the best possible contract terms for your business?
Let’s find out.
What is software renewal management?
Renewal management comprises the tracking, documenting, and actioning of SaaS contract renewal dates, forming an important part of an organization’s software management strategy.
But why is it necessary?
As subscription-based tools, SaaS products require regular renewal in order for a company to continue using their services. However, as organizations add more software tools into their stack than ever before, many are finding it increasingly challenging to keep on top of the multitude of different renewal deadlines and billing periods. This can cause a number of problems for finances and productivity.
Fortunately, adopting a comprehensive software renewal management strategy can mitigate these risks. In fact, here are some of the top benefits it could provide for your business:
More accurate budgeting
As SaaS costs continue to rise, it can be difficult to budget accurately for your IT spending — and this is even more challenging if you aren’t tracking your software renewals.
When formulating budgets for each quarter of the fiscal year, you’ll want to know precisely when to expect recurring costs, whether your revenue streams are sufficient to cover these, and the value of any projected profit. With software renewal management, you’ll have visibility on when each of your contract renewals takes place, and when you can expect to be billed and see outgoings.
This can also help you to anticipate any future increases to your IT costs, as renewals are often accompanied by price uplifts. Our data shows that software vendors increase their prices annually by an average of 9% — which might seem marginal for one or two contracts, but when you consider that the standard company now deploys as many as 110 software tools, these yearly hikes in cost can take a huge toll on your budget.
Ever-growing SaaS costs will need to be considered in your forecasting, particularly if your contract allows for regular price increases.
The ability to negotiate better contract terms
Even if you’re wanting to keep a subscription to a particular tool, you may want to renegotiate the contract terms to better suit your company’s needs as you grow. By managing your software schedule, you can ensure that you don’t miss any windows of opportunity prior to the renewal period to renegotiate your terms.
In fact, we recommend regularly reviewing and reconfiguring your contract terms as your subscription goes on, to continue to receive the best return for your investment. For example, you may wish to:
- Increase/decrease your allotted bandwidth or seat numbers
- Inquire about a multi-year agreement
- Renegotiate specific clauses such as auto-renewal or price uplift
Over time, these renegotiations can add significant value to your contracts — for example by eliminating expensive overage fees if you regularly exceed your usage limit, or earning discounts for a longer subscription term. Tracking your renewals provides ample lead time to renegotiate before you’re locked in at the same terms for another year, or even at a higher price should you miss the opportunity to rebut an uplift.
The ability to eliminate underutilized, redundant and duplicate tools
Alternatively, managing your renewals can also help you to trim your software portfolio when necessary, for example as part of an application rationalization process. If an audit has revealed that a particular SaaS tool in your stack is no longer providing value or it’s not being utilized, having visibility on the contract’s end date can help you to plan for its termination.
This way, you won’t be caught out by a duplicated or unused tool auto-renewing for another subscription period — and in doing so, continuing to drain your budget.
Renewal management can also help you to transition smoothly between tools if you’re canceling one plan to sign on with an alternative product. By keeping on top of your renewal periods, you can make sure that you have fully terminated your subscription prior to the renewal date, and put plans in place to onboard with a new tool without any significant obstruction to your workflow or productivity.
How to manage your software renewals
Committing to managing your software renewals might seem like an arduous process, but once you have the appropriate documentation in place, it’s straightforward enough to govern your subscription renewals. Here’s what we recommend:
Centralize your software procurement
Effective software management starts with good procurement practices. In order to maximize visibility on contract terms and renewals, all procurement should be centrally managed by a dedicated team responsible for overseeing the contract and any renewals.
This prevents contract governance from becoming fragmented between different bodies within the company, such as department heads or individual team members, which could result in unmanaged SaaS and important renewal deadlines being missed.
Keep track of auto-renewals
Auto-renewal clauses are a common feature of many SaaS contracts. And while they can be a convenient asset so that you don’t have to spend time resubscribing to your tools each year, you should still be aware of which contracts in your stack will auto-renew, as well as the dates and terms that you are signing back on for.
Monitoring your auto-renewals is vital if you want to plan for any renegotiations, cancel a contract in good time, or simply assess how your software costs might change between each subscription term.
Create a system of record
The comprehensive way to track all software contract terms and important dates is by building a SaaS system of record. This documentation acts as a central knowledge base for SaaS tool data, such as renewal dates, billing periods, and usage rates — helping to inform future renewal and procurement decision-making.
Some teams choose to regularly update a spreadsheet of SaaS knowledge to make up their system of record, while others streamline the process with a dedicated piece of software.
Let Vertice track and manage your software renewals
At Vertice, we offer a one-platform solution for businesses to manage their entire software portfolio, providing automated contract tracking and visibility on all approaching renewals. We help organizations to streamline their procurement and maintain a comprehensive system of record from the moment they decide to take on a new software tool, monitoring for cost optimization opportunities and maximizing the value of all contracts.
That’s not all we do though.
With access to the pricing benchmark data for more than 13,000 software vendors worldwide, our expert team of SaaS vendors can negotiate the very best price and contract terms on any renewal or purchase.
Learn more about our risk-free service here, or alternatively try out our free cost savings analysis tool to see how much your company could be saving on SaaS.