Overview

Managing SaaS subscription renewals effectively is key for IT and procurement managers striving to maximize cost savings. However, presenting these achievements to executive stakeholders can be challenging. The Renewals Yearly Summary report is your streamlined solution, offering a clear, visual summary of renewal management year-over-year (YOY).

Available for customers on the Enterprise plan

Benefits

• Visibility: Easily track and present changes in contracted spend over the years.
• Clarity: Enjoy a clear, visual presentation that’s perfect for impressing executives and stakeholders.
• Contextual Savings: Highlight savings within the broader context. Even renewals that result in cost increases can reveal potential savings. Torii aggregates and analyzes your yearly renewals, enabling you to add detail and tell each renewal story your way.

How it works

Torii analyzes all apps with active contracts for the selected year, comparing their annualized contract values year over year to identify cost increases or decreases.

The report offers:

• Top-Level Visualization: A waterfall chart that clearly illustrates cost increases and decreases.
• Detailed Table: A comprehensive table displaying every analyzed app and their annualized contract values year over year.

The table can be filtered by renewal buckets using the drop down filter menu or by clicking on one of the buckets in the waterfall chart.

Renewal buckets

After analyzing the annualized contract value, apps are divided into the following renewal buckets:

• Cost Increase: The current year’s annualized value is higher than the previous year.
• Cost Decrease: The current year’s annualized value is lower than the previous year.
• No Change: The current year’s annualized value is the same as the previous year.
• Closed App: There’s no new contract for the current year and the app has been closed.
• New Contract: No previous contract was found, indicating a new purchase.
• Not Renewed Yet: The renewal date for the contract hasn’t arrived yet.
• Not Renewing This year:The renewal date for the contract is in a future year.
• Missing Contract: There’s no new contract for the current year, and the app is not closed.  This indicates that the contract was probably renewed but the new contract was not yet uploaded into Torii.

Understanding Annualized Contract Value and Year-over-Year Change in Contract Value

What is Annualized Contract Value?

The Annualized Contract Value (ACV) of a contract is a metric that converts the total value of a contract into an equivalent annual amount. This helps in understanding the yearly financial impact of contracts with varying durations.

Why is Annualized Contract Value Important?

Calculating the Annualized Contract Value allows you to compare contracts of different lengths on a consistent basis. This is particularly useful for assessing changes in contract value between calendar years, which can indicate cost increases or decreases.

How Torii Calculates Annualized Contract Value

Torii calculates the Annualized Contract Value for each contract using the following steps:

1. Determine the Contract Value: This is the total amount you will pay over the entire duration of the contract.
2. Identify the Contract Length in Months: This is the total number of months for which the contract is valid.
3. Annualize the Contract Value: Torii uses the following formula to convert the contract value to an annual value:

\[
\text{Annualized Contract Value} = \left( \frac{\text{Contract Value}}{\text{Contract Length in Months}} \right) \times 12
\]

Example Calculation

If you have a 15-month contract with a total value of $15,000:

1. Total Contract Value (TCV): $15,000
2. Contract Length: 15 months
3. Annualized Contract Value:
   \[
   \text{Annualized Contract Value} = \left( \frac{15,000}{15} \right) \times 12 = 1,000 \times 12 = 12,000
   \]

Calculating Year-over-Year Change in Contract Value

To determine the change in contract value between calendar years, Torii follows these steps:

1. Calculate the Annualized Contract Value for the Previous Year: Torii uses the above formula for all contracts active in the previous year.
2. Calculate the Annualized Contract Value for the Current Year: Torii uses the above formula for all contracts active in the current year.
3. Determine the Change in Annualized Contract Value: Use the formula below:
   \[
   \text{Change in Annualized Contract Value} = \\
   \text{Annualized Contract Value for Current Year} - \text{Annualized Contract Value for Previous Year}
   \]

Example 1 Calculation - Single Annual Contract

Assume you have the following annualized contract values:

• Annualized Contract Value for Previous Year: $50,000

• Annualized Contract Value for Current Year: $55,000

Change in Annualized Contract Value:

\[
\text{Change in Annualized Contract Value} = 55,000 - 50,000 = 5,000
\]

This indicates a $5,000 increase in the contract value from the previous year to the current year.

Example 2 Calculation - 2 Overlapping Contracts for the Same Period

Let's consider a more complex scenario:

Previous Year Contract:

• Initial 12-month contract value: $50,000
• Addition of $10,000 for the last 6 months.

Current Year Contract:

• Renewed for 12 months at $80,000.

Change in Annualized contract value:

1. Calculate the Annualized Value of the Addition: 
   \[
   \text{Annualized Value of Addition} = \left( \frac{10,000}{6} \right) \times 12 = 20,000
   \]
2. Combine the Initial Contract and the Annualized Addition:
   \[
   \text{Total Annualized Contract Value for Previous Year} = 50,000 + 20,000 = 70,000$
   \]
   
3. Determine the Change in Annualized Contract Value:
   \[
   \text{Change in Annualized Contract Value} = 80,000 - 70,000 = 10,000$
   \]
   

This indicates a $10,000 increase in the contract value from the previous year to the current year.

Summary

By calculating the Annualized Contract Value of your contracts and comparing these values between calendar years, you can effectively track changes in your contract expenditures. This helps in budgeting, forecasting, and identifying trends in your vendor costs.

The Renewals Yearly Summary report is your go-to tool for presenting your renewal management achievements, making it easy to gain executive support and drive even more significant cost savings.

Recommended followup actions

• Identify missing contracts and reach out to their respective contract owners with a request to upload them into Torii, or simply email them to contracts@toriihq.com.  
• Share the report to initiate conversations about this year's renewal management efforts, achievements, and future planning.