Read more about SaaS optimization: How to Stop Being a Target of Vendor Upsizing

Three Things to Look for When Renewing SaaS Subscriptions

4 min read Mansoor Ahmed

Purchasing software on a subscription has been a god-send for organizations…but, as we’ve pointed out before, there is a dark side to the SaaS subscription model.

Buying software on subscription has its benefits, such as seamless updates to new software versions—but it can also cause problems when managing SaaS renewals, with many SaaS customers underestimating their spend because they do not have the appropriate tools to track it. And while consumers need better expense tracking and SaaS usage measurement tools, vendors also demand vendors to be more transparent.

SaaS providers vary a great deal when it comes to how transparent they are with the renewal process. In some cases, this is intentional; but in many cases, it simply stems from the fact that there is no clearly articulated set of standards for handling SaaS renewal. This article seeks to rectify that, explaining to SaaS consumers exactly what we should expect from a transparent, convenient, and ethical renewal process.

1. Timely, Transparent Alerts for SaaS Renewals

Maximizing renewals is the second-largest growth activity for SaaS companies, below new customer acquisition and above upselling. With that in mind, there is not much incentive to encourage clients to cancel, even when the accounts are inactive. The ugly truth is that some SaaS companies actually make it hard to cancel on purpose. While some vendors intentionally erect barriers to SaaS cancellation, others do it inadvertently, merely copying what others do in the industry. The net effect of these actions, whether intentional or not, is the same for clients of SaaS companies.

Some vendors process renewals without sending a receipt. When the vendor collects money in this way, their clients realize they are being charged for unused software only by checking their credit card statements or using a SaaS management tool. This is generally recognized as being contrary to SaaS renewal best practices. However, it is still one of the most common reasons businesses continue to pay for solutions they do not use.

While most reputable businesses do at least send receipts, it is much less common for SaaS companies to send alerts before processing payment. They fear that this will encourage cancellations, and they would rather protect their revenue than their clients. If the client decides to cancel after seeing the receipt, at least the supplier could collect one more payment. In some cases, the client may plan to cancel before the next payment instead of immediately and then forget when the time comes.

For these reasons, maximizing visibility into SaaS spending is the best way to keep costs under control. In addition to using tools that track costs, it is helpful to identify which vendors rely on dark patterns (whether intentionally or inadvertently) regarding SaaS renewals. Working with vendors who avoid silent renewals and similar practices is one of the best ways to keep IT budgets under control.

2. Easy Cancellation and Downgrading

App discovery and expense tracking is only the first step. From there, one of the most important practices for SaaS cost optimization is to measure consumption. The ability to visualize utilization on a user, department, and organization level provides insights into how critical a given solution is, making it one of the most important features of SaaS management tools. If employees have not adopted the software, it does not make sense to keep paying for it. 

If nothing will be lost when the subscription is cancelled, the decision is easy. If a subscription cannot be cancelled outright, though, downgrading should be an option. For example, an organization might need to keep some access to a software product and get by with fewer users or features. When a software product is useful only to a certain department or group of employees, it is still important to renew, but there is no need to buy licenses for the entire staff. 

While it is not necessarily up to the provider to point out inactive accounts or low levels of adoption, there should be easy options to cancel or downgrade as needed. The best SaaS companies make it easy to upgrade or downgrade packages at any time, giving their clients more control over the features and the number of seats for which they pay. SaaS renewal best practices are all about giving businesses more control, and scalable subscriptions do exactly that.

3. Ongoing Support for SaaS Spend Management

There are software companies that continue to facilitate SaaS cost optimization after renewal (Netflix, Mailchimp, and Basecamp are three examples of vendors that set the gold standard). Given the shortcomings of traditional corporate cards for SaaS spending, some vendors might offer advanced reporting to make spend tracking and consumption measurement easier. While there are some dark patterns in every industry, most providers are making efforts to follow the best practices for SaaS renewals. Modern IT budgeting is much simpler with transparent, trustworthy vendors.

The average medium-sized company now uses roughly 150 unique SaaS products (while Fortune 500 companies might use 2-4 times more), and that number only continues to increase. Managing all of those renewals manually can take dozens of hours away from other initiatives and introduce unnecessary opportunities for human error. As the importance and prevalence of SaaS solutions continue to grow, SaaS management tools become increasingly necessary.

Getting Started With SaaS Renewal Management

The ability to handle SaaS renewals, cancellations, and payments is vital for modern organizations. At Quolum, our goal is to make the entire SaaS management process as easy and effective as possible. To learn more about our approach to optimizing SaaS spending, reach out to us for information or access.

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About Quolum

Quolum is a full-stack SaaS Spend Management product. Its data-driven renewals, spend controls, license monitoring, contract oversight, and a buying concierge helps companies save millions of dollars in spending.
Quolum is ideal for companies that have hundreds of SaaS tools. Finance, Procurement, IT Teams, and departmental spend owners use Quolum to help manage SaaS sprawl and remove shelf-ware.
Talk to us to get a demo of the product. You can start seeing savings in just a few weeks. No spreadsheets are required.