What’s an Effective Strategy to Manage My SaaS Renewals?

Ben Pippenger: Hey Everyone. Ben Pippenger here with another episode of SaaSMe Anything. In this episode we're going to cover the question and answer the question, what's an effective strategy to manage my SaaS renewals? Three things we'll cover off on. Number one, why is it tough to get to all of your SaaS renewals? Second, we'll run through a scenario to help you understand manual versus programmatic renewal management. And then lastly, I'm going to give you some tips for how to prioritize where to spend your time.

Ben Pippenger: All right, so let's jump in here. Why is it tough? First and foremost, your SaaS stack is rife with wasted spend under- utilization and chaotic renewals. Gartner has predicted that by 2026 companies will be overspending on SaaS by at least 25%. According to our own data, according to Zylo's data, we found that 44% of licenses go wasted every month, and that equates to$ 17 million in wasted SaaS spend each year. And then last but not least, on average, organizations have 204 renewals a year.

Ben Pippenger: So you think of the sheer sides of the problem, and it's easy to feel overwhelmed. Today, many companies are manually managing their renewals, and while I imagine this is painful for many of you, I'm going to walk through what this looks like.

Ben Pippenger: So let's imagine a procurement leader, I'm going to call her Wendy. Wendy is tasked with application renewals. Her ultimate goal is to maximize renewals to drive value, cost savings, and vendor consolidation. Throughout the renewal process she asks a lot of questions. So those questions are, what do I need to renew? For this Wendy goes to her spreadsheet that she maintains which shows 15 upcoming renewals. On the list zoom is the highest value one, the highest dollar renewal that's out there, so she's going to tackle that one first. She asks herself, " Well, how can I maximize the value with this renewal?" Well, Wendy receives an email from Zoom about a price increase, which they'll waive if she adds to the license count. She doesn't know what a proper license account should be, so she needs to engage and track down and find the app owner. So who is the app owner? Well, Wendy spends a lot of time tracking down the application owner, and finally finds out it's a guy named Steve. So then she goes to Steve and she asks Steve, " Well Steve, how many licenses do we need?" And when she asks that, Steve doesn't know where to get the data, he sort of takes some time to figure it out. And he tells her also that they're adding headcount. So it'd probably be wise to increase their users during the renewal process.

Ben Pippenger: All right, so Wendy takes that into consideration, the next question she asks herself, well, what price should I even be paying here. With no data points to leverage Wendy renews with Zoom at the price they provided, adding additional users to avoid the increase that we talked about earlier on that per license cost. So after that's all done, Wendy's like, how do I scale my efforts here? She realizes that she's wasted a lot of time looking for basic data to make a decision, and ultimately she knows she lost some money on the table.

Ben Pippenger: Now, this is a pretty oversimplified example, but I think the key takeaway that you can take from that example is that a manual approach has resulted in a time- consuming and inefficient process, the inability to do any sort of license optimization, an overall increased contract value, no visibility into redundancies across her SaaS stack, and then really an unscalable approach to covering all the renewals within Wendy's company. As Wendy does this once and realizes she has 14 more apps to renew, she knows this is unscalable and she's not going to be able to increase her procurement coverage as she continues down this road.

Ben Pippenger: So I'm hoping that a lot of this is resonating with you all and you're feeling Wendy's pain here. Now that we've pushed on these pain points, let's examine what you need to do to run an effective proactive renewal management strategy. First, you need a SaaS management tool to establish a central source of truth. For Wendy, this will break down the data silos across her organization. This means that the right data is at her fingertips, allowing her to be more proactive and efficient and make more informed renewal decisions.

Ben Pippenger: Let's go through those same questions Wendy asked earlier, but through the lens of this proactive strategy.

Ben Pippenger: So the first question, what do I need to renew? Rather than referencing a manual spreadsheet, Wendy has a renewal calendar within her SaaS management platform that alerts her of renewals 90 days in advance. She has time to prepare for the Zoom renewal.

Ben Pippenger: How can I maximize value? Like the previous example we went through with Zoom and the price increase, Wendy still wants to make the most of her investment and work with the app owner, Steve, to do so.

Ben Pippenger: So who owns the app? Unlike last time, Wendy doesn't have to spend time tracking down the app owner as part of the app information stored within the SaaS management platform application overview of the Zoom subscription.

Ben Pippenger: How many licenses do we need? Insights from our S& P show that 229 licenses are inactive and 50 can be downgraded. Wendy and Steve set up a workflow to kick off that process, which will leave space for the new hires Steve plans to onboard without Wendy having to buy more licenses from Zoom.

Ben Pippenger: What is a fair price to pay? Wendy leverages benchmarking data to gauge what the SKU costs should be and uncover similar apps within their organization. She negotiates a 10% cost reduction from the average cost as well as a downgrade in license count.

Ben Pippenger: How can I scale my efforts? With key ownership, usage, contract and spend data and a single source of truth Wendy can continue to renew with confidence and with ease.

Ben Pippenger: The results of operationalizing SaaS management for Wendy include proactive strategic renewal process, license optimization, redundant app visibility, and price decrease via benchmarking. Even with the platform, you have hundreds of renewals. It's not possible to cover them all.

Ben Pippenger: So how do you prioritize which to tackle? First thing is to determine the criteria for above and below the line for where you want to spend your time. This is typically based on the spend amount for your applications. $75, 000 is a good recommendation for where to think about starting, but that's going to vary based off of your own organization.

Ben Pippenger: Next, for those apps that are above the lines for those that you want to be renewing, give yourself enough time and build a strategy for how you want to manage.

Ben Pippenger: So some strategy points would be, number one, optimize for licenses you're not using and that you need to renegotiate. Second would be to run benchmarks against your price you're paying, so you know how much leverage you can apply and how deep you can go with your negotiations. Third, look to consolidate capabilities from other applications. And then fourth, make sure you're looking at the terms in the contract they may want to renegotiate, such as your payment terms or price gaps.

Ben Pippenger: Next, remember that auto- renewals aren't always a bad thing. If you're already getting a good price and have active usage of all of your licenses, don't spend time on it and let it auto- renew.

Ben Pippenger: And then also, there are still lots of savings in the mid and short tail spend. Professional services are a great way to extend your team and help you stay on top of more renewals. You want to work with those that are true partners, though not bulldozers of your vendor relationships. Consider joint value from the start.

Ben Pippenger: So the bottom line today is that a spreadsheet is the bare minimum you should be doing to keep track of your SaaS renewals. If you're okay with missing renewals, making ill- informed decisions and leaving money on the table to each their own. But if you want to be more strategic, proactive, and efficient with your SaaS renewals, having a tool and process can save you incredible amounts of time and money. That's it for this week's episode. We'll catch you next time.