We talk to many IT companies who are at all different stages of growth and development when it comes to building out a renewals team. The well established companies generally have a team of Inside Sales or Renewal Specialists in place who already have processes and procedures to follow, however smaller companies are often still working out the best approach to manage their future renewals.
Regardless of whether you are building out a team or looking to optimize your existing one here’s a few approaches:
Centralized: A centralized model is a dedicated team with 100% focus and accountability for renewals or installed based including owning revenue targets.
De-Centralized: A de-centralized approach allocates responsibility for managing and transacting renewals to the existing sales organization.
Shared Service: In a shared service model, the sales component of the renewal is administered by the existing sales organization, with the transaction process (quote to cash) managed by a separate dedicated operational team.
Choosing the right option is never easy and companies should prioritise based on performance measures so that the model can be tweaked and improved on a continual basis.
Below is a quick summary of the pros and cons of each model.
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Model
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Pros
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Cons
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Centralized
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- Full control over renewals team with dedicated focus
- Ability to track targets and manage performance
- Generates largest increase in revenue and growth in install base from renewals
- Results in optimized process with channel partners
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- More expensive to establish separate team
- Can be isolated from rest of sales team, may affect collaboration on opportunities
- Less specialization within product lines/business units
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Decentralized
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- Cheapest option as workload is transferred to existing team
- Can offer high degree of cross and up selling
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- Suffers from lack of focus à renewals are de-prioritized in favor of net new sales
- Staff not always well trained to manage the renewal process and deal with renewal related customer interactions
- Typically results in work overload and potential burnout of staff
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Shared Service
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- Best of both worlds approach: treated as regular sales opportunity, but reduced administrative burden on Product Sales team to process transactions
- Strong emphasis on selling beyond the “renewal”
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- Shared accountability can create problems between staff if communication breaks down
- Can suffer from lack of focus by Sales team
- Potentially higher processing cost with two teams managing renewals
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While each of these options offers advantages and disadvantages, the decision should be based on what’s best for your organization factoring in establishment costs, renewal maturity stage, volume and expected return.
For example, if your renewals organization is quite mature (ie there is already an established team), processes a high volume of transactions and there is a high expected return by management then moving to a centralized model (if not already used) would be best. Regardless of whether your renewals organization is performing well or not, we recommend these organizations look at long-tail and aged or expired renewals as there may be an opportunity to increase revenue from these low value or aged opportunities.
If your organization is at the beginning of a renewal journey, then a decentralized or shared service model may be more appropriate as it may be cheaper to set up initially and can offer some advantages in leveraging an existing sales force. Both these models can be great for a short-term solution, however if you are looking to gain a significant return from your renewals, then having a dedicated team will always ensure these opportunities are treated with high priority.
For more information on each of these models or to assess your company’s renewal maturity stage, contact us at info@iasset.com.
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