SaaS Renewal Cycles Are An Unrealized Opportunity For CIOs

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There are a couple of general rules in life: People like to have choices, and they don’t want to feel pinned down. Just as these rules apply to restaurant menus and lenient retail return policies, they also apply to software. 

When software as a service (SaaS) came onto the scene 20 years ago, people were tired of getting “stuck” with on-premises software due to the prohibitive costs of switching — both in terms of time and money. The cloud-native approach and absence of a 12-month project plan still translates into a lot of benefits for enterprises. Ironically though, getting locked-in with a SaaS vendor is very easy to do these days. It’s within the renewal cycle, however, that enterprises have an unrealized opportunity that CIOs are in the best position to lead.

The Challenges Of Today’s SaaS Renewal Process

Today’s SaaS renewal process is, frankly, all over the place. This shouldn’t come as a surprise since SaaS vendors selling specialized apps like CRM, marketing automation and even cloud storage wherever they could find a foothold. If that foothold was in marketing, customer success, sales or engineering, it only mattered that someone could execute a contract, and if that was done without IT’s knowledge, so be it. Beyond that, many SaaS providers selling apps with wall-to-wall potential have employed tactics like freemium models to land and expand wherever they can.

The renewal process usually begins with the original license owner, the procurement team and the IT team. These groups work together to try to make decisions under a tight deadline. This process is almost always manual (via spreadsheets), and it rarely goes beyond a list of users, their department and the date they last used the app. It also must be repeated for every application purchased by an enterprise, so large companies are always preparing for a renewal discussion involving one vendor or another. In addition, most major vendors will have “true-up” discussions at various stages of a contract, which further exacerbates the problem.

Given that burden, it’s easy to see why CIOs don’t look forward to SaaS renewal cycles or true-up conversations. The work they have to do in advance is time-consuming, and it takes away from what they really want to do: deliver innovative technology to their internal constituents.

The good news is that technology has matured, and new tools are available to help solve these challenges. Many SaaS vendors have, for example, built APIs into their software that — when combined with data from application logins, contract details and other sources — can be used to obtain a real-time picture of the software.

To complement this, here are three tips for IT leaders looking to focus their renewal process on the right outcomes:

1. SaaS Rightsizing: Not Just About Saving Money

At the most simplistic but impactful level, CIOs can drive savings at renewal time when there is a drastic difference between what is being paid for and what is being used. Referred to as “rightsizing,” a company has an opportunity to eliminate or downgrade excessive licenses at renewal time, thereby saving hundreds of thousands of dollars — sometimes even millions — when renewing one application alone. And these savings multiply when repeated for every application that an enterprise has purchased.

However, a bigger opportunity exists. Forward-thinking CIOs want to deliver business value, not just save money. Let’s look at the collaboration category as an example. In many organizations, big bets are being placed on tools like Workplace or Slack to improve the speed of communications and streamline processes. But what happens when both apps are in place and the enterprise needs to make a decision to standardize or allow the apps to coexist? In situations like this, CIOs should ensure these applications have strong business applications and utilize either homegrown or third-party tools to analyze whether or not applications are delivering on expectations. Perhaps the data reveals that consolidating would be good, or perhaps it shows that it would actually hurt the business. Either way, understanding your business and leveraging analytical data are the keys to effective rightsizing.

2. Going Beyond Contract Anniversary Conversations 

For all the qualities enterprises expect from SaaS, it’s surprising how infrequently IT teams engage with SaaS vendors. In some cases, it’s just on the contract anniversary date. CIOs can spearhead change here, but it’s important that they do so with the right information about application usage. Collecting details on how employees are engaging with their application on a regular basis will allow CIOs to have candid conversations with vendors throughout the year.

3. Talking To Your Employees About What Works (And What Doesn’t)

The best CIOs know what makes their employees tick, what drives them nuts and what they want from a SaaS solution. Many famous companies of the last decade are known for being obsessed with their customers — think Amazon, Zoom, Zappos, etc. The modern CIO can apply this same strategy to their company’s employees. The importance of getting to know the organization you serve may sound obvious, but rightsizing and understanding SaaS application data is easier when paired with a first-hand understanding of your team. Most of the leading CIOs I talk with have found ways to ensure their employees have access to them — with a feedback mechanism that goes beyond the traditional quarterly survey that often gets deleted. These CIOs view personal interaction as critical to driving the agenda of their organization. – Read more