Navigating the Evolving SaaS Licensing Landscape: Balancing Hidden Costs and Strategic Solutions

Saas Licences - The hidden costs
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As many SMEs are looking to move their applications to the cloud, there is a dynamic shift taking place in the world of Software as a Service (SaaS) licencing. The paradigm of licensing models is experiencing a transformation, which businesses need to be aware of so they can evaluate the impacts, and potential associated costs when making strategic decisions.


  1. The Decline of Pay-Per-Usage

Many software vendors are moving away from pay-per-usage models and towards locked annual contracts. As a result, monthly flexibility is becoming more expensive, making it harder for some businesses to justify. A good example of this shift is Microsoft’s New Commerce Experience (NCE). In the past, you could adjust the number and tier of licenses you had on a monthly basis, but now the system requires a locked minimum commitment for the full year. Although you can upgrade or increase your license volume during the term, you can’t decrease the licensing tier you’ve committed to except on the anniversary of your licence renewal. This can cause you to overpay for unused services, so it’s important to plan carefully to avoid unnecessary expenses.


  1. Addressing Auto-Renewals


Auto-renewals can be convenient in ensuring continuity of service, but they may also result in unexpected costs if not managed closely. Dates can sneak up on you, and you may find yourself committed to an additional 12 months without anticipating it. It’s important to note that the 14-day cooling-off period is only valid for the first 14 days of your first contract, not after a renewal. Therefore, it’s crucial to keep an eye on auto-renewals to avoid any unpleasant surprises.


  1. Cancellation Windows and Terms


In addition to auto-renewals, make sure you are aware of the specific way and time frame in which you need to cancel the contract. Most cancellation terms are 3 months in advance, so it is recommended that you carefully review the cancellation terms and assess your experience with the software more than three months prior to the contract’s end date. This way, you can avoid missing the window to cancel and prevent being locked into another 12-month period even before your current contract is finished.


  1. Avoiding Vendor Lock-In

It’s important to know that some software licenses cannot be transferred between distributors or IT Managed Service Providers. This means that if you want to switch providers, you should be aware of the software license renewals beforehand. Failing to do so can result in unexpected costs that you may not be aware of.


  1. Duplication of Services


Software vendors are constantly trying to add more value to their products, which leads to the release of new features and bolt-on services. However, this can result in organisations owning multiple software licenses for the same service, which leads to duplication of services. Avoid paying for unnecessary licenses and services by streamlining into a single provider.


Strategic Solutions to Navigate the SaaS Licencing Maze


In response to these shifting dynamics, businesses can adopt strategic measures to mitigate hidden costs and optimize their SaaS investments:


Thorough Evaluation: Before committing to any licensing agreement, conduct a comprehensive analysis of your businesses current and future needs. Including what software you already have, what features and departments it services and where there are overlaps and gaps.


Streamlining Renewals: Consider aligning all software license anniversaries to synchronize renewal cycles. This approach minimizes the administrative burden of managing multiple renewals throughout the year.


Regular Reviews and Adaptation: Continuously review licensing agreements to ensure alignment with evolving business needs and review new features or bolt-on options released. Optimise usage to avoid unnecessary costs and remain adaptable to changes.


Navigating SaaS Licensing: An Opportunity for Strategic Agility


While the shift in SaaS licensing models brings about challenges, viewing it through a strategic lens allows businesses to capitalise on opportunities for better alignment with their operational needs.


Aligning software license anniversaries presents an opportunity to streamline administrative tasks and consolidate efforts, reducing the complexities of managing multiple renewal dates throughout the year.


By acknowledging these considerations and implementing strategic solutions, businesses can navigate the evolving SaaS licensing landscape more effectively. Careful planning, negotiation, and a proactive approach to assessing and adapting strategies can empower companies to mitigate hidden costs and optimize the benefits of SaaS licencing solutions in today’s dynamic business environment.