How to take control of contract renewal management in 2024

What is contract renewal management?

Contract renewal management is the process of monitoring every existing contract in your company workflow in order to cut costs and achieve higher levels of optimization.

By developing a contract renewal strategy, businesses give themselves greater visibility of renewal dates, renewal terms and contract performance, allowing them to conduct a thorough review process before making an informed decision on whether or not they want to continue with their current contract.

Contract lifecycle management (CLM) is a necessary function in every business in every industry, but this is particularly true in the world of software renewal. With the average company now using 110 different software applications, contract renewal management has never been more important — and never been harder to maintain.

The ever-rising use of company software isn’t a trend that shows any signs of slowing down. The SaaS market has been growing exponentially for decades and is forecast to continue doing so; for this reason, renewal management software has become an essential tool for modern businesses looking to optimize their SaaS spend management.

Why is software renewal management important?

The main reason: cost. Software vendors have been raising their unit prices by an average of 9% a year. When these price hikes are multiplied across 100+ contract extensions, the compound effect is extremely potent. In this, it’s clear that effective contract management software’s ability to significantly highlight and reduce suboptimal spending is a necessity.

Many subscription contracts come with auto-renewal clauses, which trigger an extension of the contract period if no preventative action is taken. These renewal clauses take away the opportunity for renegotiation or even contract termination, and once they’re triggered it’s nigh-impossible to get a refund.

Automatic contract renewals are a boon for suppliers and a pain for their customers. Without automated reminders in place — or without sufficient time to adequately respond to reminders — software providers are able to thrive on the power of inertia; the understanding that most companies are simply too busy to allocate enough time to the contract management process, or don’t have contract management systems in place that can help them.

Subscribers receive the worst of both worlds in these situations. With no contract review established, spend is likely to both continue and increase on a suboptimal software package. Contract renewal opportunities mark the moment when customers can ask for amendments to their original contract, renegotiating on areas such as product integrations and other key platform features, or even simply to call it quits when a license has run its course.

With notifications used to alert customers on upcoming contract expiration dates, renewal management software can save money and optimize services, all without the last-minute panic.

Contract renewal management also boosts security by weeding out the nuisance of shadow IT. These platforms act as one central contract repository, with full visibility of end-users. If purchasing decisions have been made outside established IT procurement protocols, these systems will highlight the relevant stakeholders by department, team and individual.

The benefits of strong software renewal management

As with any business function that looks to streamline operations, software renewal management brings a number of benefits:

• Cost savings — The ability to renegotiate contract terms represents an opportunity to manage and potentially reduce your overall SaaS spend. By keeping abreast of contract renewal dates, customers can axe the subscriptions they no longer need or negotiate a price more suitable to the feature set they actually need.
• Time savings — Staying up to date on contract processes can be a time-consuming manual task requiring multiple complex spreadsheets. Without sufficient management software in place, organizing a contract renewal strategy around key dates and notice periods becomes increasingly more difficult in this scenario. Not only is this inefficient, it’s also a drain on your staff’s productivity, and potentially even their job satisfaction.
• Better security — Contract renewal management is an effective tool in eradicating shadow IT and its associated security risks. With CLM software in place, your IT teams are afforded greater peace of mind.
• Optimized subscriptions — There’s nothing more frustrating than missing the chance to renegotiate a new contract, particularly if you’re aware of areas of improvement. With time to prepare for contract renewal, you can outline the ways in which your subscription can better support your business needs. This might involve a change in KPIs and performance metrics, added and retired features, or simply switching subscription tiers.
• Improve service levels — The primary function of software renewal management is to ensure your subscriptions are working for your organization. If your supplier isn’t offering sufficient support, renewal dates are the ideal time to discuss improvements to service level agreements.
• Develop business relationships — The bottom line is that software suppliers want your subscription to be a success, because if it’s good for your business, it’s good for theirs. The contract renewal process is about provider and customer engaging in open, honest discussions to the benefit of all. These conversations are the driving force behind the development of business partnerships, and as such vendor relationship management has become increasingly important.

Five contract renewal process best practices

As with all areas of business, contract renewal management works best when companies adhere to a checklist of best practices. Take a look at the list of five below:

1. Keep key information in one place

Information on renewal dates and other important details becomes impossible to track when kept in disconnected siloes and chaotic spreadsheets. Make sure you keep all contract information stored in one centralized place, where visibility is high and it’s easy to make amendments when changes to contracts are made.

2. Set reminders

You need to know exactly when contracts are set to expire or automatically renew in order to prepare for the next steps. When your procurement or negotiating teams have time to prepare for contract reviews, your business can extract more from its subscriptions, saving valuable time and money.

3. Renegotiate

If your subscription isn’t fulfilling the function it’s supposed to, request a meeting with your supplier to discuss the possibility of renegotiating the terms of the deal. The solution might be quick and easy, but make sure you’re always negotiating from a position of strength, leveraging knowledge of the current market and alternative software solutions.

4. Communication

Communicate with suppliers and stakeholders well in advance of any decision making. Your team needs to know whether it has access to certain platforms or not, as well as the specific capabilities of those platforms.

5. Build relationships

Contract renewal management also encompasses supplier relationship management. Understanding the needs of your supplier’s business will help develop trust, leading to healthy long-term partnerships. This will also massage any future contract negotiations ahead of time.

The right renewal management software will facilitate all of these best practices.

Strengthen your contract renewal management with Vertice

Our SaaS Purchasing platform is designed to assist organizations’ contract renewal management. By bringing all of your software licenses into one highly-visible location, the platform allows companies to take back control of their SaaS purchasing spend, arresting the industry trend of spiraling costs with no boost to profitability.  

The Vertice platform contains contract automation tools that alert end-users to critical contract data, including dates for performance reviews and renewals. You can store contract templates on the system and access information of all your current deals from one centralized location. As such, software renewal across your SaaS portfolio quickly becomes more streamlined, leading to significant time and money savings.

In addition to the platform, Vertice’s customer purchasing teams will help you negotiate — or renegotiate — optimized contracts across your entire SaaS stack. With detailed access to software vendor transactions, we have access to negotiation levers that serve to maximize value for our customers.

We’ve helped many businesses through the transition of digitizing the contract renewal process. Spenmo’s adoption of the Vertice platform, for example, spared the company 50 hours of contract negotiation time in the first year alone, helping contribute to 25% savings in the process.

For more information on how our SaaS Purchasing platform can help your business enjoy similar benefits, click on the link.