By Jill Button, President and CEO of ProcurePro Consulting
Why This Matters Now
Canadian SMBs continue to feel intense cost pressures. Inflation, economic uncertainty, and rising technology expenses are affecting budgets and margins across every industry. Nearly half of Canadian SMBs warn that one more major cost increase could force them to close according to a recent study by DEXT.
In this environment, auto renewing IT contracts become one of the most damaging sources of avoidable overspend. Renewals happen quietly, pricing shifts without discussion, outdated terms remain in place, and unused licenses continue billing. Suppliers rely on passive renewals for revenue growth, and businesses with limited time or procurement capacity fall straight into the trap.
I have seen this repeatedly throughout my career. Every missed renewal window and every automatic extension represents lost negotiating power. Every evergreen clause reinforces supplier control instead of client control. Auto renewals are silent and costly, but entirely avoidable with the right approach.
The Risks SMBs Face
Price increases that go unnoticed
IT suppliers and SaaS providers often include contract language that allows annual increases. When a contract renews automatically, those increases simply slide into effect. Many clients do not discover the change until the invoice arrives, long after the renewal period has passed.
Evergreen clauses hidden inside agreements
Auto renewal clauses allow a contract to roll over without any active confirmation from the client. These clauses are legal and extremely common, but they undermine client control.
Based on my experience, I strongly advise clients to avoid auto renewal language entirely. Instead, require that all renewals must be confirmed in writing by the client. This small change forces a conscious decision to renew and prevents unwanted extensions if someone forgets or misses a deadline. It also places responsibility back on the supplier to contact the client, present the renewal, and secure approval.
Here is the reality, in my experience, almost all suppliers will initially push to keep their evergreen clause saying it’s their policy. However, when clients push back firmly and confidently, most will agree to remove it.
Paying for unused or outdated solutions
Many organizations continue to pay for solutions, commonly referred to as “shelfware” that no longer reflect their operational reality. Over time, businesses accumulate:
- Extra seats
- Duplicate tools
- Unused modules
- Features nobody touches
Auto renewals keep these costs alive long after the value has disappeared.
SMBs lack dedicated procurement structure
Most small to mid-sized organizations do not have full procurement teams, contract managers or specialized IT Procurement experts. Renewal dates live inside emails, spreadsheets, and calendars scattered across departments. Without experienced, focused contract management, renewals slip by unnoticed.
How to Escape the Auto Renewal Trap
Build a centralized contract database
Centralize all contracts, grouped by categories such as IT and software agreements, stored in one centralized document repository. Include dates, terms, expansions, license counts, notice requirements, and a designated internal owner for each contract.
This is your foundation for control.
Set reminders well before every renewal
Do not wait until the last minute.
Use reminders at a minimum of six to nine months before the renewal date. This gives you plenty of time to review the requirements, license counts, actual usage, and, if needed, go back out to market and conduct a competitive bid such an an RFP or RFQ. You should test the market minimally every five years to ensure fair market value, explore innovation and to keep your suppliers delivering competitive terms and pricing.
Layer in additional reminders at one hundred twenty days and ninety days, and make sure all reminders are aligned to the contract renewal notice periods specified in the agreement.
This structure gives you time to evaluate usage, prepare negotiation strategies, compare alternatives, or cancel before the renewal triggers automatically.
Audit usage carefully
Before making a renewal decision, always confirm:
- How many licenses are in use
- Who is using them
- Which features are actively needed
- Where duplication exists
Right sizing is often one of the fastest ways to reduce spend.
Push back hard on auto renewal clauses
This is one of the most powerful steps a business can take.
I always advise my clients to eliminate evergreen language completely and replace it with a requirement that renewal must be explicitly approved in writing by the client, thirty days in advance of renewal. This shorter renewal confirmation give you much needed time do the necessary due diligence.
But Why?
- Forces a conscious renewal decision
- Prevents accidental extensions
- Requires the supplier to proactively engage
- Resets the power balance
- Opens the door for renegotiation
If a supplier claims auto renewal is standard or not negotiable, challenge it confidently. Tell them auto-renewals are against your policy. In my experience, most suppliers will remove auto renewal language when pressed.
Negotiate price protections and reasonable increases
Pricing is often where suppliers try to regain revenue lost during the initial term. I have seen suppliers justify fifteen percent increases at renewal by claiming they did not increase pricing during the initial term. My response is consistent. “So what.”
Software development costs occur up front. Ongoing enhancements, maintenance, and support are already baked into licensing and support fees up front.
My guidance is simple.
- Do not accept vague wording like “annual increases may apply”
- Do not accept uncapped increases
- Do not accept increases based only on supplier discretion
Instead, negotiate clear and predictable pricing terms, for example:
- No increases during the initial term
- At renewal, increases capped at three percent or Consumer Price Index, whichever is lower
- Where you anticipate a multi year relationship, extend that principle so years four and five also have clearly defined maximums.
You may need to negotiate hard for these protections;
“You don’t get what you don’t ask for”.
The result is predictable budgeting and protection from sticker shock.
Treat renewals as strategic decisions
Every renewal is a checkpoint. Ask:
- Does this supplier still meet our needs?
- Should we modernize?
- Can we consolidate suppliers?
- Are we paying for features we do not use?
Passive renewal is expensive. Intentional renewal is transformative.
Industry Trends to Watch
Subscription fatigue is growing
Businesses are subscribing to more tools than ever with a proliferation of software that poses risks financially and operationally. Financial exposure rises when renewals happen silently.
AI supported contract intelligence
AI supported tools are helping organizations uncover risky renewal clauses and cost saving opportunities.
Economic pressures are increasing
Between inflation, interest rate fluctuations, and trade uncertainty, unmanaged IT renewals are now a strategic risk.
What Businesses Should Do Next
- Build contract and renewal visibility
- Assign responsibility internally
- Conduct supplier reviews
- Standardize your renewal process
- Negotiate proactively with clear data
- Remove evergreen clauses wherever possible
Bottom Line
Auto renewing IT contracts represent some of the largest hidden costs inside SMBs today. Price increases, unused licenses, and evergreen clauses drain budgets quietly and unnecessarily. With visibility, structure, and confident negotiation, you can eliminate this waste and regain control of your technology spend.
If you want support reviewing your IT supplier agreements or reducing overspend before your next renewal cycle, I invite you to:
Book a strategy call or visit our website to explore our services and read our testimonials.
👉 What to do now:
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