SaaS Contract Management

The increasing usage of SaaS and shift from a perpetual (buy software once) to a subscription-based purchase model poses a challenge for companies to get complete visibility and control of their SaaS spend. A reliable contract management process is crucial to managing the highly dynamic portfolio of SaaS services and efficiently allocating the IT budget.

LeanIX SaaS Management Platform helps build efficient and collaborative management of your SaaS contracts and their renewals across all relevant stakeholders (e.g., Procurement, Legal, and IT).

In this documentation, we will explain the typical business drivers for Contract Management initiatives and how you can use LeanIX to realize this use case.

WHY is SaaS Contract Management a relevant use case?

With the rapid growth of SaaS expenditure, it becomes more and more challenging for companies to get control of their IT landscape and costs related to a large amount of SaaS services. Some of the pain points companies without a central contract management system are facing are

• More than half of SaaS in a company is unknown and non-centrally managed
• 30% of SaaS spend is wasted due to poor license management (Gartner)
• 43% of organizations are unable to locate a stored contract (Gartner)
• Manual uploading and tracking of contracts, lack of contract metadata (such as spend, termination notice)
• Negotiation and renewals of contracts take a lot of time
• Risk of cost explosion as individual departments and people continue adding new software on the fly

Companies are seeking a single source of truth that they can trust to get reliable information on SaaS spend and govern the entire SaaS to achieve their business goals, such as

• Application rationalization and cost saving based on reliable usage & spend data for SaaS
• Establishing an efficient contract & renewal management process to optimize IT budget allocation
• Understand under-utilized apps to push adoption and remove unnecessary apps
• Build a solid data foundation for smarter negotiation with vendors
• Collaborate and timely manage renewals to ensure business continuity

Contract Lifecycle Management systems that most companies use for contract creation, storage, and tracking of contracts and vendor data, but they usually don’t provide spend/usage information and budgeting capabilities for strategic planning and forecasting.

WHAT does this use case mean?

Definition

SaaS Contract Management refers to the process of administering, monitoring, and negotiating contracts with SaaS providers to streamline expenditures and optimize value-for-money. This may include tasks such as keeping track of all contracts, assigning ownership and delegation for contract handling, aligning with stakeholders for negotiating terms and conditions, tracking contract end dates, and ensuring compliance with the terms of the contracts.

Tools like LeanIX SMP facilitate and automate SaaS Contract Management (e.g., with notifications). Once set up, they help you to take every renewal process for larger licenses as an opportunity to challenge the existing contract and avoid waste of money, e.g., for unused or unnecessary licenses. A tool like LeanIX SMP can help you start the process ahead of time and maximize the potential of the agreement for your organization. You can read more on this example and best practices here: Microsoft Enterprise Agreement Renewal and True-Up - The Definitive Guide

Benefits of the use case

SaaS Contract Management unlocks huge potential for IT, Procurement, Finance, and Legal departments that can benefit from:

• 100% visibility of all your contracts with a trusted system of record
• At least 50% savings on wasted SaaS spend through removing inefficiencies in the current SaaS portfolio and optimizing SaaS contracts and utilization as well as renewal management (e.g., with LeanIX renewal alerts, the business will no longer auto-renew subscriptions that were previously hidden from their view)
• Improved budgeting and understanding of the financial impact of renewals
• Reducing operational costs thanks to collaborative approach bringing insights from FI, IT, InfoSec, and Procurement together and less time spent in finding contract information and renegotiating & renewing contracts
• Flexibility: By managing SaaS contracts, businesses can ensure that their SaaS subscriptions and licenses can be scaled up or down as needed, in line with their business needs
• Provide comprehensive views for efficient governance of contract management and renewal process with clear roles and responsibilities
• Ensure compliance: By implementing governance policies, procedures, and controls businesses can ensure that their SaaS solutions are used in compliance with the contract terms, company's policies, and industry standards. e.g., with ISO standards for IT Asset Management (ISO 19770)

HOW to do SaaS contract management with LeanIX

A high-level description of LeanIX offers

Realizing Contract Management with LeanIX SMP provides has following advantages for companies:

• Automated ingestions of SaaS application data
• Having one tool that combines accurate contract data with SaaS spend & usage data for efficient SaaS contract and renewal management
• Automated recommendations for SaaS spend optimization
• Efficient governance of contract management and renewal process with clear roles and responsibilities and a collaborative approach to source information across FI, Procurement, Legal, IT, InfoSec

By following this guide, your organization should be able to achieve the following outcomes within 3-6 weeks:

• Get the top 50 spend services under control in 30 days
• Increase adoption of under-utilized tools and increase ROI
• Retire unused/unnecessary services
• Better visibility for negotiation and control of renewals

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Information

Companies can unfold the full potential of the solution by starting their journey with LeanIX EAM and build their Application repository using SaaS Discovery and upgrade to LeanIX SMP for full dashboard, SaaS spend, usage and contract renewal features.

For LeanIX EAM users: Activate SaaS Discovery

If you are a LeanIX EAM user, your journey with LeanIX most probably has started with building your application portfolio and conducting assessments of your portfolio - with LeanIX SMP, you will now expand the value of LeanIX for your organization! The first step is to ensure that the SaaS Discovery feature in LeanIX EAM is activated and that you already leverage SaaS data in LeanIX EAM to get full visibility of your SaaS and non-SaaS applications. This is the recommended approach by LeanIX to leverage the synergies of LeanIX SMP across IT and the departments responsible for contract management (Finance, Procurement, and Legal). This will also allow you to synchronize data between the LeanIX EAM and the LeanIX SMP workspace.

Understand the business goals: Example Application Rationalization

Every organization has a different starting point for contract management and solving a business challenge. For this guide, let’s imagine your company is interested in rationalizing applications to achieve cost savings. This is a typical business case Enterprise Architects would drive, e.g., with the help of LeanIX EAM (see here for a detailed description of the use case). The EA Function would build a data repository for the company’s applications linked to business capabilities. Now, they would seek to enrich that contractual data with reliable information on licensing costs, quantity, etc. Currently, most companies do this to a huge extent manually by reaching out to Finance/Procurement/Legal or Business Owners.

The following steps describe how you can set up LeanIX SMP to create one central source of truth for contracts and build a highly efficient contract management process around that.

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Information

The set up of LeanIX SMP would be usually driven by the function that is responsible for contracts in your company. This can be Finance, Procurement, Legal.

Step-by-step guide