Subscriptions for software are almost over. If you renew your subscription without looking for better options, do you renew it? No matter how happy you are with the current system, the renewal presents an opportunity to ensure that you have the most up-to-date software.
Globally, software buyers in 2020 was surveyed by Gartner to understand how they approach subscription renewals. Based on our analysis, we have developed four practical steps to follow when approaching the end of a software contract.
1. Each renewal should be treated as a new software search
Regardless of whether they are satisfied with their current software or not, over 80% of survey respondents investigate alternatives in depth or at a cursory level.
Consider new options before renewing your current software. Even if you simply renew, you could be missing out on new, valuable features that have recently emerged.
You need to pay attention to the signs that indicate you need new software – if any of these apply, you need to examine your options in the software market.
Almost all companies take advantage of renewal periods to browse other systems and see what competitors are offering that could add value to their business. Before renewing software, almost half (45% of companies surveyed) conduct a thorough evaluation.
Actions to Take:
Which are the things you should keep an eye out for? Start by addressing any major complaints you have about the current system – both technical and security issues are often the primary reasons for looking at other options.
Also, do not forget about these common scenarios that may apply to your business:
- Your return on investment (ROI) from the software wasn’t as high as you expected.
- The use of a single login for multiple users or complex workflows slow down projects due to business challenges.
Finally, you may have heard of the new capabilities from your peers or been approached by your current vendor. All of these reasons can cause you to consider new options, so take a couple of months to research your options.
2. Prioritize features so you can save money and “rightsize”
A whopping 64% of respondents reported that they had downgraded or terminated a subscription at least once in normal economic conditions.
Every time that a business renews its software, what exactly does it do? Many of these companies expand their services or add new features. However, many people want to get the same functionality for less money.
Therefore, you should consider what features of your software are essential to your business goals and determine which functionality you will no longer require.
Providers want to keep your business for as long as possible, so they have a motivation to prove their value and provide the features you want, even if the cost is less.
Actions to Take:
Organize features into three buckets: required, valuable, and optional. If some optional features are removed, ask the vendor how their pricing would change.
Renewing is also a good opportunity to evaluate your support needs. After about a year with new software, you should find that you spend less on support services as your staff gains experience. Consider which vendor’s support plan works best for you.
Learn how to evaluate the true costs for software as you move toward the renewal date by using our article on the best practices for completing a software purchase. Download the template that allows you to document these features, then use it to list and score them.
3. Avoid lengthy commitments if possible
Only 55 percent of buyers sign contracts of one year or less.
It made sense to sign multi-year contracts when software could only be installed on local computers. With cloud-based software, switching systems can be done in weeks rather than months.
For small and midsize companies, Software-as-a-Service (SaaS) products offer a more attractive alternative. With subscription pricing, they are more affordable, and being mobile, you can access the system from anywhere. It is much easier to switch between different systems when this is available.
Make sure you understand all of your options, as each vendor will have different policies for contract lengths and offer a cheaper package for one-year commitments.
Actions to take:
You should review your company’s current software contract before renewing to know what your company needs to do when terminating. Here are some common clauses:
- Termination for convenience or cause: Termination “for convenience” means you can terminate for any reason at any time, while “for cause” means you can terminate only if the vendor violates the contract.
- Early termination fees: Vendors often add penalties for ending a contract early that offset their costs incurred by losing a client.
- Post-termination obligations: When you cancel a software agreement, whether early or later, you may have obligations. As an example, the contract should specify how to collect and remove all your data.
Understand your contract’s termination clauses. Following one agreement, you may opt to commit to a longer-term contract if you’re happy with the product. You’ll have greater flexibility to change software quickly with a shorter contract.
4. Do not compromise on your systems
A total of 726 respondents (52%) say that they have renewed their subscription agreements even though they were not satisfied.
It is estimated that more than half of the businesses in the survey renewed a subscription to software they did not like. You may have to stick with your current, but less-than-ideal, system depending on a number of factors.
There are other options besides “less than ideal”. Getting started with our software reviews is a great first step. To significantly speed up research efforts, product profiles include overall rankings, customer service ratings, features, and detailed user reviews. These help you to identify the best options much faster.
Actions to Take:
Make sure you start researching early. You should create recurring meetings for your software evaluation team, made up of your top stakeholders, in the final year of your subscription contract in order to determine:
- Currently, there are a number of problems with the system
- Alternatives to the standard system
It helps to know what you can do before renewing. Step one in our tips for aceing your software negotiation is to include in these meetings the same people your negotiation team needs.
Reviewing different systems during renewal time is a good opportunity. When you’re satisfied with your present software, renewing is the simplest step. If either of these situations applies to you, follow these tips:
- Consider how you can “rightsize” your current system to save money and reduce costs if you wish to keep it. We have prepared 6 steps for negotiating a software contract that will help you.
- A year before your contract ends, gather a group of colleagues and employees to identify pain points users experience with your current system. Identify alternatives to eliminate those aches and pains by conducting research. We have outlined 3 powerful ways to get people on board with new software.
- Check out our Software reviews for additional resources if you’re still on the fence about your software renewal:
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