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What is SaaS Contract Management?

best practices saas contracts


The proliferation of cloud-based Software-as-a-Service (SaaS) forever changed how organizations acquire software, now with individual employees often leading the charge. In fact, it’s so easy to purchase SaaS — enter a credit card number, provide some basic information, and click through the agreement terms — users can be up and running with a new SaaS tool in mere minutes.

The process feels so seamless users often breeze through the contractual terms, missing highly valuable information, including automatic renewal dates, security terms, data storage, and more. The ease of SaaS procurement often helps teams and employees excel at their jobs and work efficiently, but decentralized software acquisition ultimately leads to wasted spend, redundant applications, security issues, and missed renewal deadlines.

To keep tabs on renewals, organizations routinely employ SaaS contract management strategies, which involve the discovery, identification, curation, and storage of all SaaS-related contracts and agreements. 

Why is SaaS Contract Management Important?

According to Zylo research, many organizations drastically underestimate the number of SaaS applications within their environment, sometimes by two to three times. The average enterprise business maintains more than 600 SaaS applications, and 200 to 300 applications typically remain undiscovered as shadow IT. Zylo research also shows large organizations experience an average of one SaaS application renewal each business day – or 20 per month. Without a plan in place, contract management quickly becomes unmanageable.

When used in conjunction with a SaaS Management platform that serves as an official system of record — practiced proactively and regularly — SaaS contract management yields several tangible benefits, including: 

  • Time savings: Storing SaaS contract information reliably in a centralized system of record reduces time spent hunting for important information like total contract value, software features and benefits, and overall number of licenses or users. 
  • Financial savings: Reviewing existing SaaS contracts regularly produces significant cost savings. For example, simply examine total users as stated in contract agreements and compare them to your actual user base. If you discover excess users, rightsize the licenses upon the next renewal (or earlier if possible) to net savings. 
  • Elimination of surprise renewals: Centralized SaaS contract management should include a renewal calendar to display every SaaS application’s renewal date and the planned notification period. With a SaaS management platform like Zylo, users can schedule alerts far in advance and plan for software renewals.
  • Leverage over contract negotiation: Easily accessible contract details make it easy to negotiate at renewal time, especially if you’ve proactively looked at utilization data for users and features. 
  • Reduced SaaS redundancy and duplication: With contract details in place, you can quickly see which applications you currently employ in your SaaS inventory. Use the information to guide future software acquisition decisions and avoid redundant and duplicate applications.

It’s true. Effective SaaS contract management can yield all of these benefits, but there’s more to it. The ultimate reward is creating better renewal operations and management. Renewals are the most pivotal moment in an application’s life cycle, and you need to be ready for them. Contract management makes it possible.

With Effective SaaS contract management you will: 

  • Know when renewals will hit: By having all your renewal dates in front of you, in your SaaS management platform, you can build a renewal calendar to alert you 30, 60, 90, and 120 days out so you’re never caught off guard by a renewal again.
  • Be in a better position to save money and time: When you can compare the data on your actual spend and usage with an application contract, you’re able to leverage that data to negotiate better contracts with your vendors. Plus, you’re able to evaluate needs and reduce waste by rightsizing licenses and eliminating redundancy in your SaaS stack. It’s all about making more data-driven decisions.
  • Know who needs to be a part of the renewal process: Procurement can’t do it all alone. SaaS management is a team sport, and you need to know who’s on that team. It takes cross-organizational collaboration between key stakeholders to achieve the best results. A SaaS management platform allows you to create a system of record to track owners well ahead of renewals to help determine the best course of action for any given application.

How to Begin Managing Your SaaS Contracts

SaaS contract management is part of the process for overall SaaS application management and SaaS spend management, just with a more granular focus on the specific contractual details and terms. Storing these details in a SaaS management platform or other record-keeping system provides an easy-to-follow, holistic snapshot of cloud-based software, enabling new software management capabilities, avenues for cost containment, and leverage for improved return on investment for SaaS.

Follow these steps to jump-start the SaaS contract management process for your organization:

  • Discover all SaaS applications: The first step to managing SaaS contracts involves identifying all SaaS applications across your organization. Note: A key challenge in the discovery process are those employee-led SaaS purchases that typically fly under the radar of IT teams. According to Zylo data, about one-third of all employees purchase SaaS applications by credit card and expense reimbursement at an average cost of about $600 per SaaS tool. If your organization currently lacks a central repository, you’ll need to reach out to individual teams or business units to determine your full SaaS inventory. 
  • Identify current contracts and purchase agreements: Every SaaS application includes a contract or user agreement to establish terms of use, start and end dates, license quantity, data-handling conditions, and renewal information. As you identify all of your existing SaaS contracts, make note of each tool’s key contractual terms.
  • Input details into a centralized system of record: Storing contract details in a centralized SaaS management system of record, such as Zylo, allows you to effortlessly search by vendor name or application type, offers the ability to quickly locate important information without reading lengthy contracts, and makes it easy to simultaneously compare details from multiple contracts.
  • Identity optimization opportunities: With a comprehensive understanding of your full SaaS inventory and contractual terms in place, look for optimization opportunities to consolidate duplicate applications, eliminate redundant or underutilized applications, and leverage better financial and security terms upon renewal.

Streamline SaaS Contract Management with Zylo

SaaS will continue to grow in the coming years, with end-user spending predicted to surpass $138 billion by 2022

With a robust SaaS contract management process in place, your organization can reap considerable financial and time savings, reduce duplicative spend and redundant software, leverage better contractual terms, and most importantly—avoid the dreaded automatic renewal.

Start managing your SaaS contracts today. Schedule a personalized demo to see how Zylo streamlines SaaS contract management for large enterprises and small businesses alike.