Rapidly growing startups utilize SaaS tools for operational efficiency, yet often stumble into chaotic contract management. Monthly and annual contracts are usually scattered across spreadsheets, receipts, and emails across multiple departments and teams.
This is where SaaS contract management software comes in. It helps businesses keep track of contracts and costs. Leveraging such technology yield companies a decent percentage of benefits from contract value. Below is everything you need to know about SaaS contract management.
What is SaaS contract management?
SaaS contract management involves monitoring, negotiating, and administering contracts with SaaS vendors to maximize value and optimize costs. Key tasks involved in this process include assigning ownership, delegating handling, tracking contracts, monitoring end dates, ensuring contractual compliance, and agreeing terms with stakeholders. The goal is to maximize the value derived from the SaaS solution.
What is a SaaS contract?
A SaaS contract is a rule book that defines the terms between a software maker and a user. It tells how to use the software, who can use it, and what to pay for it.
A SaaS contract has several parts:
- Plan and price: What’s included in the plan and what it costs.
- User rights: Who can use the software and how.
- Data rules: How user data is kept, used, and managed.
- Customer support: The help a user can get.
- Payment ways: How to pay for using the software.
- Renewal rules: If and when the contract renews itself.
- Performance expectations: The service level a user can expect.
SaaS contracts aren’t like other business deals and often require special care and handling.
Why is SaaS contract management important?
SaaS contract management is crucial for retaining customers and securing recurring revenue. Efficient management leads to predictable revenue, while poor management results in high churn rates, slow sales cycles, and missed renewals. To enhance SaaS contract management processes, it’s important to grasp the definition of SaaS contracts and their distinctions from other agreements.
How SaaS contracts differ from other business contracts?
SaaS contracts stand apart from other business contracts due to two primary factors. First and foremost, unlike traditional contracts involving physical goods, SaaS companies do not deliver tangible objects to customers. Instead, customers purchase the rights to use and access a specific software product. Consequently, SaaS contracts must outline detailed regulations governing software usage and delineating the specific privileges granted to customers under the license.
Secondly, SaaS contracts employ a subscription-based model. Customers subscribe to access the software and are presented with pricing options and various features based on their chosen subscription tier. Payments are made periodically, and discontinuing the subscription results in the loss of software access. This distinctive characteristic means that SaaS contracts govern ongoing, long-term transactions rather than one-time purchases.
SaaS contract lifecycle
Organizations need to consider and effectively manage various stages within the SaaS contract lifecycle. These stages include procurement, contract negotiation, implementation, renewal, and termination.
During the procurement stage, organizations actively select the most suitable SaaS provider that aligns with their specific needs and requirements. Contract negotiation follows, where key terms regarding the SaaS solution, such as support, pricing, and service level agreements, are actively identified and agreed upon.
Once the contract is in place, organizations proceed with the implementation stage. They actively deploy the chosen SaaS solution, integrating it with their existing infrastructure, and ensuring users receive necessary training.
As the contract reaches its expiration date, organizations actively evaluate the terms, utilization, criticality, and performance of the SaaS provider during the renewal stage. This assessment informs decisions on whether to extend or modify the contract. Finally, organizations actively manage the termination stage. If necessary, they transition to an alternative solution or provider, concluding the current SaaS contract.
By actively understanding and effectively managing each stage of the SaaS contract lifecycle, organizations can minimize risks associated with misunderstandings or disputes that may arise.
SaaS contract management challenges
SaaS contract management presents specific challenges that businesses must navigate:
- Contract volume: SaaS companies generate a large number of contracts due to automated sales processes and widespread software licensing. Scaling organizations with limited legal resources find it difficult to manage the manual administration involved.
- Contract renewals: SaaS businesses heavily rely on contract renewals for revenue. Tracking and managing contract deadlines become increasingly challenging as the customer base and contract volume grow.
- Technical jargon: SaaS contracts are filled with technical terms, making contract drafting and understanding difficult for sales teams without legal or technical expertise.
- Complicated pricing: SaaS contracts often feature intricate pricing structures, including tiered and usage-based models. Customization options and negotiation complexities can hinder standardization efforts.
Implementing efficient strategies and best practices can streamline SaaS contract management processes for businesses.
SaaS contract management benefits
Effective SaaS contract management practices offer significant advantages for IT, Procurement, and Finance departments. By maintaining a single system-of-record, businesses can achieve complete visibility over all SaaS contracts and unlock the following benefits:
- Improved budgeting: Gain a clear understanding of the financial impact of all SaaS renewals, enabling better budget planning and allocation.
- Reduced operational costs: Adopting a collaborative approach brings together insights for Finance, IT, InfoSec, and Procurement. This streamlines contract information retrieval, renegotiation, and renewal, leading to cost savings.
- Proactive renewals: Stay ahead of renewals with timely alerts and usage insights, avoiding auto-renewals for critical subscriptions that may have been overlooked previously.
- Minimized wasted spend: Identify and eliminate inefficiencies in the current SaaS portfolio, optimizing contracts based on actual usage and avoiding unnecessary expenses.
- Enhanced contract governance: Foster a collaborative approach to contract management, establishing clear roles and responsibilities to standardize the renewal process.
- Flexibility: Scale subscriptions and licenses up or down as needed to align with evolving business requirements.
- Compliance assurance: Ensure SaaS solutions used within the organization adhere to contract terms, company policies, and industry standards, mitigating compliance risks.
Best practices for SaaS contract management
To enhance SaaS contract management, businesses can implement the following best practices:
Integrate contract tools with CRMs
Integrating contract management systems with Customer Relationship Management (CRM) platforms reduces data entry workload and enhances workflow efficiency. Seamless data transfer between platforms, such as Juro and popular CRMs like Salesforce, Hubspot, and others, ensures accurate contract information and keeps sales teams informed of contract status.
Automate SaaS agreements
Automating the contract creation process saves time and improves efficiency. By utilizing contract automation tools, businesses can generate SaaS agreements quickly from pre-approved templates. Automation eliminates manual data entry and customization efforts, streamlining the contract drafting process.
Enhance contract data and visibility
Post-signature contract management is vital for SaaS contracts. Utilizing contract management platforms provides a centralized repository for storing contracts securely. OCR functionality enables easy searchability, while customizable contract dashboards offer comprehensive contract data visualization.
Automate renewal reminders
Automating contract renewal reminders eliminates reliance on manual spreadsheets. Contract management software, including contract reminder tools like Juro, automates deadline tracking and sends automated reminders to alert teams of upcoming contract renewals. This ensures proactive management of contract milestones and reduces the risk of missed renewal opportunities.
Implementing these best practices empowers businesses to streamline their SaaS contract management processes, save time, and improve overall efficiency.
Opt for longer agreements
Opting for longer-term contracts increases the likelihood of securing larger discounts from SaaS vendors. If these are not feasible, it’s best to agree cap rates to avoid rice increases within a certain period for future renewals.
Monitor and analyze usage
Proactively track SaaS usage across your teams. Make informed renewal decisions based on how your teams are utilizing and benefiting from their SaaS tools. This data can also guide future procurement efforts.
Best SaaS contract management software
ContractWorks
ContractWorks provides user-friendly contract management software with quick deployment and a simple interface suitable for enterprises of all sizes. Its AI-powered OCR and robust search capabilities enable swift location of specific content, while the cloud-based repository ensures secure and controlled access to data. The platform’s intuitive interface facilitates easy onboarding of new employees, and personalized reporting generates valuable insights through tag-based reports. However, it lacks built-in collaborative features and may require manual data entry at times. Pricing starts at $700 per month.
GateKeeper
Gatekeeper offers a centralized information center for efficient storage and management of SaaS contracts and vendor details. Its AI-powered, cloud-based contract management software automates workflows, optimizes contract processes, and provides an auditable record of operations. The platform includes a redlining solution compatible with MS Word, enabling effective contract negotiations. Additionally, Gatekeeper integrates an electronic signature solution compliant with international standards. While the software’s AI system is reliable and efficient, the pricing of $995 per month may be prohibitive for smaller firms.
PandaDoc
PandaDoc offers an all-in-one document software system that simplifies the creation, approval, and digital signing of contracts. Its drag-and-drop editor facilitates easy proposal and contract writing, while features like approval procedures, version history, , redlining, chat capabilities and comments enhance collaboration. Although writing documents from scratch can be time-consuming, PandaDoc’s centralized, cloud-based contracts with intelligent search functionality and contract templates make it a favorable option for users. Pricing starts at $19 per month.
Concord
Concord offers tools to automate and integrate the complete contract administration process. With pre-approved templates and customizable approval workflows, contract writing and distribution become efficient. The version-control feature ensures access to the most recent document versions, and users can track contract statuses to expedite the purchasing cycle. Multiple individuals can sign documents, but some users have experienced document formatting issues. Pricing starts at $17 per month.
Trackado
Trackado is a cloud-based tool designed to streamline the entire contract lifecycle. It allows users to categorize, search and collect contracts by various criteria, such as category, sector, or business partner. The platform includes a business partner section for organizing contacts, sending emails, and tracking contract activities. Users receive notifications for essential dates and gain insights into the financial health of contracts. Trackado’s user-friendly interface facilitates immediate usage without extensive training, although it lacks e-signature document creation and a template library. Pricing starts at $39 per month.
Contractbook
Contractbook enables contract writing in machine-friendly formats for data storage and future planning. It provides a collaborative environment for working with multiple teams, inviting external guests, and conducting seamless negotiations. Users can create, store, and send contracts with ease. The platform also features smart task management on the Activity Dashboard for contract updates. Pricing is set at $999 per month.
What to consider before sending SaaS contracts
During the multi-faceted process of contract negotiation, it is essential to look at the following:
- Licensee: Who is considered the licensee in the contract? Does it encompass all users or solely the buyer?
- Contract length: What are the specified start and end dates of the contract?
- Pricing: How is pricing detailed in the contract? What is the total yearly cost for the buyer? Are there any additional fees to consider?
- License type: What type of license does the vendor provide? Is it valid for a single year or multiple years?
- Software use: How is software use described in the contract? Are there any limitations or restrictions imposed?
- License renewal: How does the license renewal process work? Are there any incentives or discounts offered for longer agreement terms?
- Non-negotiables: Are there any non-negotiable terms set by the vendor, such as features, data ownership, or compatibility?
- Support provision: How does the vendor provide support? Is it outlined in the contract or covered in a separate agreement?
Conclusion
Managing SaaS contracts is an art itself. It requires a mix of hard and soft skills and some acumen to get right. When dealing with contracts for your own SaaS business, make sure to consider the following:
- Negotiate contracts that accurately reflect the agreed-upon terms and conditions.
- Seek legal review to ensure compliance with relevant laws and regulations.
- Use clear and understandable language in the contract.
- Address important questions regarding software use, contract duration, pricing, license type, renewal process, support provision, and liability limitations.
- Consider using SaaS management platforms to streamline contract management, optimize cloud spend, and maintain control over data.
By adhering to these practices and utilizing appropriate tools, businesses can effectively navigate the complexities of SaaS contract management and maximize the benefits of their agreements.