We’ve covered the nuts and bolts of SaaS contracts before, including the now ubiquitous auto-renewal clause featured in many. The benefits are clear: SaaS customers save extra time they would have spent re-negotiating a contract, and SaaS providers get a consistent revenue stream. But there are still avenues where a SaaS auto-renewal can go terribly wrong. Just ask Paul Robichaux, CEO and Founder of MyDerm Portal.
MyDerm Portal originally purchased a subscription to a cloud-based meeting and conferencing tool, which Paul and his team used to meet with customers and give presentations. As the company grew, they piled up subscriptions to over 20 SaaS platforms, and they weren’t able to monitor all of their transactions. Reconciliation became an onerous process.
Robichaux happened to be reviewing his business expenses one day, and the fees for the meeting and conferencing tool caught his eye. “The expense definitely did not look right,” he said. “We can’t be paying this much for meeting software.”
Robichaux immediately emailed the SaaS vendor to ask about the discrepancy, and received a response: yes, the price did increase, and he was notified. He went back and looked through his email for any sort of notification, but found nothing. “I never got an email that said the promotional package was expiring, or a message when I logged in.”
Robichaux ended up spending several hours doing an extensive search through his email, and finally found something. Among the hundreds of emails the SaaS provider sent out was a weekly update. Buried somewhere in the bottom of the email was a notification that the SaaS provider’s promotional package was expiring, and the price increase would take effect.
The price increase was pretty significant - 30% over the original price, according to Robichaux. Based on his interaction with other vendors, he was expecting something more in terms of notification. “When you get GoDaddy emails that your domain is expiring, they email you 100 times,” said Robichaux. “There was none of that here - the price increase was buried in another email that was just a weekly update.”
After his research, Robichaux explained to the SaaS vendor that he had no knowledge of the price increase and didn’t agree to it. The SaaS vendor remained firm on the new price, so Robichaux ended up cancelling with no refund. That meant lost funds, and more time researching a new meeting and conferencing tool, testing it out, and training his staff on how to use it. “This was all time we could have been spending doing sales and focusing on our business,” he said. “What a waste.”
Robichaux would have remained a customer if the SaaS vendor had behaved differently. “If they said upfront that they were increasing the price, or even just apologized for the lack of notification, we would have stayed,” he said. “But there was nothing done to make it right.”
And in the process, the SaaS vendor lost a customer - but gained a detractor. “Whenever people ask me which conferencing platform I use, I make sure to say ‘don’t use these guys’,” said Robichaux.
So what are the key takeaways from this experience? Here are a few:
Create an inventory of all your SaaS tools
Think of your corporate SaaS budget like your home budget. At home, you probably have a software program that tracks all the bills you owe each month - rent, groceries, utilities, credit cards, etc. Do the same with all the SaaS platforms you use, even if it is just a spreadsheet. And if it is something more complex like an ERP, make sure you have a line item to distinguish SaaS from on-premise software.
Keep tabs on upcoming renewals
Within your tracking system, make sure to record the dates of any upcoming renewals. Remind yourself to check in on these SaaS tools prior to the renewal dates, so you don’t get stuck with a contract you don’t want. Consider adding a couple dates to your tracking system - one that is the actual renewal date, and one that is 30, 60, or 90 days before. That extra time can give you a head start if you need to change terms.
Find out what others are paying for similar services
Researching SaaS tools can be an onerous process. Do yourself a favor and grab pricing information for each SaaS platform. Even if you’re not considering all of them, a price list for a series of similar SaaS vendors will give you a basis for what you can expect to pay - and a way to push back if the price suddenly increases.
Research the reputation of SaaS vendors online
It’s harder to come by B2B reviews online - but not impossible. B2B review sites like Capterra, TrustRadius, and Software Advice can give you some context on customer experiences. And Glassdoor can even shed some light, as employees sometimes vent about negative business practices.
Do you have a tale to tell about a SaaS auto-renewal gone bad? Send us your story at email@example.com.