Adjusting Your License Needs at Renewal: Expand, Reduce, or Restructure?
As of August 2025, enterprises are scrutinizing software license renewal strategies more closely than ever.
Major software contract renewals present a golden opportunity to optimize costs and realign licensing with actual usage.
Procurement leads, CIOs, IT sourcing managers, and software asset managers are finding that the renewal phase is the most strategic moment to decide whether to expand, reduce, or restructure licenses.
This guide provides a straightforward, vendor-skeptical approach to license optimization at renewal, including software license negotiation tips to avoid paying for unused licenses and mitigate audit risks. Let’s dive into how to leverage renewals for maximum value.
Learn more about Salesforce Renewal Negotiation Strategies.
Why Renewal Is the Most Strategic License Review Moment
- Renewal is your leverage point: When should you adjust license counts at renewal? Every renewal is a key leverage point because it’s the one time in the contract lifecycle you can make significant changes. Mid-term, you’re usually locked in – vendors won’t let you reduce license counts or costs. At renewal, however, you have a choice: renew on your terms or walk away. Vendors know this, so they’re more inclined to negotiate. Use this moment to push for software license renewal strategies that align with your needs (whether that’s to expand, reduce, or restructure) rather than just rubber-stamping last year’s numbers.
- Vendor incentives at renewal vs. mid-term: Vendors have strong incentives to strike a deal at renewal. Your software provider’s sales team is often under pressure to meet quarterly or annual targets, and your renewal is their opportunity to secure revenue (and potentially upsell). As of 2025, many vendors are also dealing with customers scrutinizing costs, so they often dangle discounts or bundle deals to encourage license expansion. Mid-term, those same vendors are far less flexible – you’re already under contract, so they have little reason to offer concessions. This dynamic means you have negotiating power at renewal that doesn’t exist mid-term. Vendors may push hard (even using fear tactics like looming deadline pressure or hints of price hikes), but remember: at renewal, you can say no or seek alternatives, which is a powerful bargaining chip.
Expand, Reduce, or Restructure: Explain the Choices
How do you decide between expanding, reducing, or restructuring licenses at renewal? Each option has its place.
Below, we break down when expansion makes sense, when to reduce license counts for cost efficiency, and when license restructuring is the best path to flexibility:
- When expansion makes sense: Growing businesses or new initiatives may justify expanding license counts. If your organization is launching new projects, onboarding more users, or adopting additional modules, increasing your licenses can support that growth. Expansion can also make sense when you’ve been under-licensed – for example, if teams are sharing accounts or you’ve deferred needs to avoid extra costs, renewal is the time to true-up and get proper entitlements. However, expand strategically: only commit to more licenses if the usage data and future forecasts warrant it. Even if a vendor tempts you with a volume discount or an upgrade bundle (“upgrade to the bigger suite and we’ll give you 20% off!”), Verify that those extra features or seats will be utilized. Expansion is wise when it directly supports business growth or new capabilities – and you negotiate terms that protect you (more on that under “Expansion, But With Controls”).
- When to reduce for cost efficiency: If your analysis finds you’re paying for a significant number of unused licenses (common in enterprises where roles change or software adoption lags), it’s time to reduce. Why keep paying for 1,000 licenses if only 700 are actively used? Reducing license counts at renewal can immediately eliminate waste and free up budget. This is a key license optimization tactic – many organizations discover 20–30% of their licenses are “shelfware” (purchased but not used). For example, if a project ends or you downsize a team, those licenses shouldn’t automatically renew. By cutting them, you avoid paying for unused licenses in the future. The renewal event is essentially a license true-down moment since most vendors won’t let you decrease counts mid-term. One note of caution: check contract terms for any penalties or dependencies when dropping licenses (for instance, if dropping below a certain volume affects your discount tier). But generally, if software is not delivering value, reducing at renewal is the smart, cost-efficient move.
- When restructuring is best for flexibility: Sometimes it’s not about simply adding or cutting – it’s about license restructuring. Restructuring means modifying the terms of your agreement to better align with your usage patterns and future needs. Consider this when your business has evolved since the last contract was signed. For example, maybe you want to switch some licenses to a different type (such as moving from device-based licenses to user-based, or from a premium suite to a mix of basic and premium licenses for different user groups). Alternatively, the vendor may now offer a new usage-based licensing model that could save money if your usage is variable. Restructuring is also ideal if you need more flexibility: for instance, negotiating shorter term lengths or adding terms that allow you to adjust counts annually without penalty. Another scenario: consolidating multiple software contracts into one for simplicity (or splitting one contract into modular pieces to allow separate scaling). The goal of restructuring is to align licensing with how you use the software. It’s the best choice when you foresee changes (growth, downsizing, cloud migration, etc.) and want a contract that can adapt rather than a one-size-fits-all renewal.
Read about Capping Price Increases in Salesforce Renewal Negotiations.
When to Plan Renewal Changes
Timing is everything. Deciding to expand, reduce, or restructure is only half the battle – you need to plan well in advance of the renewal date to execute these changes effectively.
- Ideal lead time before renewal: Don’t wait until the last minute to formulate your renewal strategy. Ideally, start planning months before the contract ends. For major software contracts, a 6-to 12-month lead time is not excessive. This lead time lets you gather usage data, engage stakeholders (finance, department heads, IT), explore alternatives, and understand vendor behavior. Early planning also helps in case you need to provide formal notice (for example, some contracts require 30-90 days’ notice if you do NOT plan to renew or if you want to reduce certain components). By starting early, you have the flexibility in your calendar to conduct internal discussions and even run a competitive RFP if switching vendors is on the table. Plus, vendors recognize when a customer is proactive – it signals that you’re prepared to negotiate hard on software contract renewal, which can bring them to a more reasonable position sooner.
- Risks of starting late: Starting your renewal planning late (with only a few weeks or days left) dramatically undermines your leverage. You risk auto-renewal traps – many contracts auto-renew by default if you haven’t explicitly canceled or renegotiated in time, which could lock you into another year (or several) of the same terms. Late planning also means you may not have time to analyze usage or identify unused licenses, causing you to renew on autopilot and pay for shelfware yet again. Vendors often appreciate it when customers are rushed; it frequently results in customers accepting a quick quote with minimal discounts or unfavorable terms simply to avoid a service interruption. In short, a last-minute renewal scramble leaves money on the table and could result in another term of suboptimal licensing. To avoid this, mark your calendar well in advance of the renewal date and treat it like a project – because it is one.
Read how you can communicate Budget Constraints to Salesforce: Getting Concessions at Renewal.
Usage Data First: Justify Your Choices
Hard data should back any decision to expand, cut, or restructure. Usage data is your best ally in license negotiations, providing the evidence to justify adjustments and counter any vendor pushback.
How do you avoid paying for unused licenses? By identifying them through careful analysis:
- Shelfware identification: Start by pinpointing what’s being used vs. what’s sitting idle. Pull reports from your software asset management tools or vendor portals to see active users, login frequency, or installation counts. You might be shocked – studies have found that roughly 30% or more of enterprise software spend is wasted on underutilized or dormant licenses. This “shelfware” is exactly where you can cut costs with minimal impact on the business. Look for telltale signs, such as licenses assigned to former employees, multiple tools providing the same function (overlap), or advanced features that few people utilize. Once identified, you can plan to eliminate or downgrade these at renewal. Not only does this reduce spend, it also tightens your compliance position (fewer unused licenses floating around means fewer compliance uncertainties). How to avoid paying for unused licenses? Make license reviews routine. Don’t wait for renewal – continuously track usage throughout the year so you have a clear picture well in advance. Then, at renewal, you come armed with data to remove every license that isn’t delivering value.
- Aligning licenses with actual demand: The flip side of cutting shelfware is ensuring you have enough where you do need it. Align license quantities and types to your current and projected usage. For each software product, ask: how many people truly need access and at what level? Perhaps you can downgrade some power-user licenses to standard ones if their usage has changed, or vice versa. Check consumption metrics: if a platform is licensed per usage (like API calls, storage, etc.), compare current consumption to what you’re entitled to. If you’ve been running below your entitlement, you may be able to negotiate a lower tier. If you’ve been exceeding entitlements, you’ll need to address that now – likely via a license true-up. (What is a license true-up, and how does it work?Simply put, it’s the process of renewing (or at a set interval) any software license. If you used more than you paid for, you purchase additional licenses to “true up” to your actual usage, usually at the agreed contract price.) True-ups ensure compliance, but they also highlight where you might need to expand. By presenting accurate usage data to the vendor, you justify exactly why you’re reducing 50 licenses of one product (nobody used them) or why you need 20 more of another (usage spiked in that department).
Negotiating Reductions Without Audit Risk
Reducing licenses is often the right move for cost savings – but many IT sourcing managers worry: How can we negotiate license reductions without triggering a vendor audit?
It’s a valid concern, because some vendors see a big reduction as a red flag for non-compliance (e.g., “Were they using more than they licensed?
Are they going to try to keep using software after cutting licenses?”
To mitigate this risk, use a two-pronged approach: contract vigilance and proactive communication.
- Contract clauses to watch: Before you propose cuts, review your contract terms carefully. Some software contracts include clauses that can complicate the process of reducing the contract. Look out for any provisions regarding maintaining a minimum license count or specific wording related to termination and renewal. For instance, are there penalties for dropping a product module entirely? Does your discount level depend on volume (and would cutting licenses reduce your discount on the remaining ones)? Also review the audit clause itself – most enterprise agreements grant the vendor audit rights, but understand the notice required and scope. If you’re in an unlimited agreement or subscription, check the true-down or true-up rules. Knowing these details helps you avoid missteps when negotiating. Additionally, ensure you’ve met any notice requirements if not renewing certain licenses. By being contractually savvy, you won’t inadvertently trigger provisions that invite scrutiny. One more tip: if possible, during your initial contract or last renewal, negotiate audit relief terms (for example, some customers manage to include language that gives a brief grace period to remediate compliance issues before formal audit action). If those aren’t in place, at least be familiar with your rights and obligations.
- Audit trigger avoidance tactics: To avoid poking the bear, be strategic in how you request and explain reductions. Come prepared with your usage data analysis – show the vendor that the licenses you want to drop are genuinely not used. For example, “We’re reducing 15% of our licenses because we consolidated two departments and those seats are now redundant – here are the utilization reports.” This transparency can reassure the vendor that you’re not trying to skirt the system; you’re aligning with reality. Another tactic is to reduce in stages, if feasible: instead of a sudden, massive drop that might alarm the vendor, you can negotiate a phased reduction (e.g., drop some licenses now, with the option to drop more next year if usage remains low). This gradual approach can feel less like a revenue cliff to the vendor. Also, maintain a tone of partnership – emphasize that you want a software license negotiation that works for both parties in the long term. If a vendor is particularly audit-happy, consider addressing it head-on: “We expect to be fully compliant after these changes. If there are any compliance concerns, let’s discuss them now rather than resorting to an audit later.” Sometimes, inviting a discussion of compliance can preempt an audit by resolving questions upfront. Finally, always perform your internal compliance check before negotiating the renewal. If you do find any compliance gaps (unlicensed usage), be honest and prepare to purchase those licenses (you should identify them before an auditor later). By cleaning house and presenting a data-driven rationale, you reduce the likelihood that your license reduction will become an audit target.
Expansion, But With Controls
Expanding your license footprint at renewal can support growth and new capabilities – but it should never be a blank check.
The mantra here is expand with controls in place. If you decide to scale up, negotiate safeguards so you don’t overspend or overcommit in the long run.
How do you structure license expansion with control?
Focus on pricing protections and usage limits:
- Price caps and thresholds: When increasing your spend or volume, lock in favorable financial terms for the future. Insist on price caps – for example, a clause that limits annual price increases (e.g., no more than 3% per year or CPI-based adjustments). If you’re adding a large number of licenses now, negotiate that any additional licenses you might need later in the term will come at the same discounted rate. You can also set thresholds: for example, you agree to expand to 1,000 users from 800, but you foresee possibly reaching 1,200 if the business grows. Try to build in a pre-negotiated price for those extra 200 (perhaps “if more licenses are needed above 1,000, they will be priced at the same per-unit rate as the initial 1,000”). This prevents the vendor from gouging you later when you’re locked in and need a few more licenses. Essentially, you’re extending the volume discount logic to future growth. Another control is tying payment to rollout – if the vendor is pushing you to buy a big bundle now, consider negotiating to pay in tranches as users onboard (e.g., 50% now, 50% next quarter when the next wave of users comes on). Usage-based licensing changes are also relevant: if the vendor offers a usage-based model, consider negotiating a cap on how much the bill can increase within a year, in case usage spikes unexpectedly, so you’re not blindsided by cost overruns. These price and usage protections ensure your expansion doesn’t turn into a budgetary black hole.
- Avoiding overcommitment: Vendors will often try to get you to commit to more than you need “just in case” – resist this. Overcommitment is how shelfware is born. Instead, accurately estimate your needs and commit to only what you truly require in the near term. For anything uncertain or in plans, negotiate flexibility. For instance, if you might need 500 more licenses in two years due to a new branch opening, you could ask for the right to add those at the same terms later, without having to include them (and pay for them) from day one. This way, you aren’t paying for capacity you’re not yet using. Another strategy is a ramp-up plan: if you know you’ll need more licenses gradually, negotiate the ability to add them in increments (quarterly or annually) at a fixed rate. Also, be wary of multi-year expansion commitments. A vendor might say, “Commit to a 3-year expansion of X% more licenses.” Only do that if you’re highly confident in that growth. Otherwise, push for shorter commitment on the expansion portion or an opt-out if the expected growth doesn’t materialize. Remember, it’s easier to add licenses mid-term (vendors are happy to take more money) than it is to remove them, so err on the side of caution. Expand with clear controls, so you maintain cost and usage oversight throughout the contract.
Smart Restructuring for Flexibility
Restructuring your licensing at renewal is all about increasing flexibility and aligning with current business realities. Instead of accepting the same structure as last term, think creatively about how you can reconfigure the deal.
Two major aspects to consider are license types and contract structure:
- License type changes: Evaluate whether your current license model is the best fit. Perhaps when you signed last time, you licensed per device, but now a per-user or concurrent user model would be more cost-effective (or vice versa). Alternatively, you may have an all-inclusive enterprise license but only utilize a fraction of the features; in this case, you could switch to a modular licensing approach, where you only subscribe to the specific features you use. For example, if you have 100 full-feature software suites but only 20 people use the advanced features, consider reducing the full licenses to 20 and obtaining 80 lower-tier licenses for the remaining users. This is effective license optimization. Another form of restructuring involves transitioning from a perpetual license with annual maintenance to a SaaS subscription (or vice versa). Each has its pros and cons: subscriptions can offer more flexibility to scale up or down, whereas perpetual licenses might be cheaper in the long term if usage is steady. Also consider new offerings: vendors often introduce new bundles or license editions that may better suit your usage than your legacy plan. Don’t assume you have to stick with the status quo – ask the vendor about alternatives. Restructuring license types can greatly reduce costs and improve alignment if done thoughtfully (just be cautious of any migration fees or losing grandfathered benefits when switching models).
- Term length and modularity: The structure of your contract term is another lever. A common question is whether to opt for a longer term or keep it short. Longer terms (3-5 years) can sometimes secure better pricing or lock in discounts, but they reduce flexibility. If your environment is rapidly changing or you expect market prices to drop (or new competitors to emerge), you might opt for a shorter term (1-2 years) so you’re not stuck. Alternatively, consider negotiating mid-term flexibility clauses, such as the ability to adjust downwards on an anniversary if certain conditions are met (some large enterprise agreements have begun allowing limited annual downsizing or service swaps). Making a contract more modular can also help. Instead of a single renewal for everything, you might negotiate separate, co-terminous agreements for different product lines or business units. That way, you can adjust or exit one portion without affecting everything. Modularity can also mean adding cloud or usage-based components alongside fixed licenses – for instance, commit to a core number of user licenses but have an option pool of additional users that you only pay for if activated. Smart restructuring may also involve consolidating or splitting vendors. For example, if two different tools overlap, you might decide at renewal to drop one and expand the other to save money overall. The key is ensuring your license structure matches your operational flexibility needs: if you anticipate change, build in the ability to flex; and if you value price stability, lock in longer-term commitments but with escape hatches where possible.
Pitfalls to Avoid
Renewal time is full of potential traps. Being aware of these pitfalls will help you avoid costly mistakes:
- Auto-renew traps: As mentioned earlier, the dreaded auto-renewal can sneak up on you. Many software contracts include an auto-renew clause that kicks in if you don’t actively cancel or renegotiate by a certain notice date. This can lead to inadvertently extending a contract without changes – a win for the vendor, not for you. Avoid this by tracking those notice dates religiously. Provide written notice of non-renewal or intent to renegotiate well in advance (even if you plan to renew, sending a non-renewal notice can be a tactical move to ensure you’re not locked in, giving you freedom to negotiate terms). Another auto-renew trap is the use of evergreen clauses in support or subscription contracts that automatically renew at higher prices unless explicitly negotiated. Always assume no news is bad news when it comes to renewals – silence could mean you’re stuck with an automatic increase. Pro tip: When signing any contract, try to either remove auto-renewal clauses or set them to renew on a month-to-month basis, rather than for another full term, to give you more flexibility.
- Mid-term escalations: Be aware of built-in cost escalations that may not be immediately apparent. Some contracts include scheduled price increases each year of the term (e.g. 5% annual uplift). If you’re renewing, scrutinize if the new quote has any baked-in future increases and negotiate them down or out. Another issue is usage escalations – for instance, a cloud contract where exceeding a certain usage level automatically triggers a higher spend commitment. Understand these mechanisms to avoid surprises. Also, be mindful of scope creep during the term: you may have added a few extra licenses here or there mid-term that now raise your baseline at renewal. It’s easy to forget those “small” additions that now permanently increase costs. Keep an eye on anything that might unintentionally increase your spend. Finally, beware of the “we’ll sort it out later” trap: sometimes in a rush, companies renew with vague promises from the vendor to fix an issue or provide a discount later, but once the ink is dry, you’ve lost leverage. Always obtain the negotiated terms in writing in the contract at renewal time – waiting until later may be too late.
Post-Renewal Governance
Congratulations, you’ve negotiated a solid renewal. The work doesn’t stop here – post-renewal governance is crucial to ensure you reap the benefits of your efforts and set yourself up for success in the next cycle.
- Tracking usage and entitlements: Immediately after renewal, take stock of your new license entitlements and any new tracking responsibilities that have been assigned. If you reduced licenses, make sure those licenses are truly retired – monitor that no one quietly reactivates unused software because they “assumed we still have it.” If you expand or restructure, keep a close watch on how those licenses are deployed. Set up a regular (monthly or quarterly) cadence to review usage metrics against entitlements. This will help you catch any drift: if usage is creeping up beyond what you purchased, you can plan and budget for a future true-up (or try to curb usage if possible). If usage is far below entitlements in some area, investigate why – perhaps more training is needed to increase adoption, or maybe it confirms you can trim those licenses next time. Essentially, maintain an up-to-date license position at all times. Not only does this avoid compliance issues, but it also reinforces a culture of license optimization throughout the year, not just at renewal time.
- Setting alerts for next renewal: The smartest organizations already look ahead to the next renewal the moment the ink is dry on the last one. Take a moment after the renewal to document what went well and what you’d do differently next time. Set reminders for key dates: the next renewal date (of course), as well as any notice deadlines for cancellations or changes, and perhaps a six-month prior alert to kick off the next review. If you negotiated special terms (such as a pricing hold for two years or an option to reduce at the one-year mark), schedule those on your calendar so they don’t get forgotten. It’s also wise to keep an eye on market trends and vendor news throughout the term – for instance, if your vendor is acquired or changes their pricing model, that intelligence will be important as the next renewal approaches. Treat license management as an ongoing cycle. By staying proactive and organized, you won’t be caught off guard, and you’ll continually align your licensing with the organization’s needs.
Future Trends
The software licensing landscape isn’t static. Looking ahead, several trends are emerging that will shape your approach to renewals in the years to come.
Staying ahead of these will give you an edge in negotiations:
- AI-driven usage forecasting: Artificial intelligence is making its way into IT asset management. As of 2025, we’re seeing tools that leverage AI to analyze usage patterns and predict future license needs with greater accuracy. Imagine having a forecast that says, “Based on historical data and project plans, you’ll likely need 15% fewer licenses for Product A next year, but 25% more of Product B.” These insights can be gold for planning your renewal strategy. AI-driven analytics can help answer how to align licensing with current and future usage by providing data-backed projections rather than relying on a gut feel.Additionally, AI can help identify anomalies or potential compliance risks (for example, spotting if certain users consistently exceed their allocations). While the field is still evolving, expect vendors to also utilize AI on their side – perhaps to identify customers who may be under-licensed or ready for an upsell. Be ready to counter with your intelligent insights. Embracing these tools internally means you walk into renewal discussions armed with predictions and what-if scenarios (“If our company grows by 10%, AI models show we’ll only need 5% more licenses due to efficiency gains, so let’s base our expansion on that.”). In short, leverage technology to make your renewal strategy as forward-looking as possible.
- Flexible pricing model adoption: The days of one-size-fits-all licensing are fading. Vendors are experimenting with more flexible pricing models – and customers are increasingly demanding them. We can expect to see more usage-based licensing changes, hybrid subscriptions, and pay-as-you-go options. For example, a software that was previously sold per user might offer a consumption-based alternative, where you pay by transaction or by the number of active users each month. Cloud services have led the charge in this model, and traditional software is following suit. How does this affect renewals? It means you might have the chance to switch models at renewal if it benefits you. Always evaluate if a new pricing model could reduce your costs or better match your usage volatility. However, be cautious: ensure any shift truly aligns with your usage patterns (e.g., if usage-based, will your usage peaks lead to increased costs?). Another trend is commitment plus flex: vendors might ask for a base commitment (for a lower rate) and then allow burst usage above that at a metered rate. This can be great for flexibility if negotiated right.Additionally, expect to see more short-term and customizable agreements as competition intensifies. Ultimately, the market is shifting toward more customer-centric licensing as companies resist paying for shelfware. By the next renewal cycle, you might find even more innovative options on the table – be open to them, but analyze them rigorously. Vendors often charge a premium for price flexibility, but if it prevents waste, it may be worth it.
Read more about our Salesforce Contract Negotiation Service.
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