6 steps to successful SaaS renewal negotiations

It's no secret that preparation is key to successful contract negotiations, but SaaS renewals come with their own set of challenges. What are you doing to prepare for negotiation success?

A hand moves a pawn through a conceptual maze of circuits. [navigating/negotiating/strategy/tactics]
Olivier Le Moal / Getty Images

As software as a service (SaaS) has gained widespread market adoption, many initial deals are expiring and customers are facing renewal negotiations. But unlike other information technology deals, your negotiation leverage is much more compromised with SaaS renewals since you do not own the application licenses.  Consider the following:

  • Do you have renewal price protections in place or is pricing wide open for negotiations?
  • Have you identified SaaS or on-premises migration options?
  • Is there enough time to negotiate and implement an alternative solution?
  • Is there a compelling enough business case to support the cost, time, and business disruption of migrating to another solution?
  • What will happen to your business if you are unable to reach agreement or choose not to renew?

Many renewal negotiations not only fail to achieve cost reduction goals but take a tremendous toll on the negotiation team and the vendor relationship.  Practically every failed negotiation occurs not because of a lack of negotiation skills, but because organizations were not properly prepared.

While SaaS renewals negotiations may be new to you, the SaaS providers conduct such negotiations every day and have well-defined processes and procedures in place.  They typically start thinking about the renewal at least a year in advance of the expiration date to gather customer-specific information that will inform their negotiation strategy and identify their goals, including footprint expansion.  They know all the negotiation levers and have evaluated the strengths and weaknesses of their position.  In short, the SaaS vendors are armed and well-prepared to drive the renewal negotiation process to achieve their goals.

Here are six key considerations that will enable your team to properly prepare for success: 

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