Gartner Research

Negotiate Critical SaaS Renewal Terms Before Signing Initial Agreement in Order to Mitigate Unbudgeted Bloated Costs

Published: 10 November 2015

ID: G00290936

Analyst(s): Dawn Hubbard, Alexa Bona

Summary

SaaS contract renewal protections are some of the most critical terms, and yet are frequently overlooked. Technology procurement leaders must negotiate renewal price protection, as well as metric and functionality diminishment protections, to minimize the risk of unbudgeted price increases.

Table Of Contents
  • Key Challenges

Introduction

Analysis

  • Explicitly Negotiate Price Protection for Renewal Terms to Ensure That Prices Cannot Increase by More Than 3% (Nominal) to 5% (Maximum), and for Multiyear Renewals, Ensure That This Is a One-Time Increase Across the Total Renewal Term, Not Annual
  • Include Clearly Defined Descriptions of the SaaS Service Entitlement, Including Functionality, Service Levels, Storage and Other Entitlements, Negotiating for No Material Diminishment, Renaming or Rebundling During a Renewal Term
  • Ensure All Subscription Pricing Metrics Are Clearly Defined in the SaaS Agreement, Rather Than Just the Order Form, and That at Least One Renewal Can Be Made Using the Same Subscription Pricing Metric

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