97% GRR is a Mirage. Here's What's Really Happening Inside ServiceNow and Workday.

Gross Revenue Retention of 97% used to be the gold standard. Now it's a warning sign.

Jason Lemkin over at SaaStr makes a compelling case that high GRR can actually mask decay, especially for ServiceNow and Workday. He argues that multi-year contracts inflate retention numbers, making them unreliable indicators of true customer love.

I buy the thesis. But I think he stops short. The real story isn't just about contract length—it's about the accumulated weight of user frustrations that the contracts are designed to hide. PainSignal's data on actual user-reported problems tells a more granular story, one that builders and investors can act on.

The Contract Length Shell Game

Lemkin's core arithmetic is undeniable. If only 33% of a three-year contract base is up for renewal in any year, and half of those churn, GRR still posts around 92-94%. Workday's five-year renewal averages? Even fewer customers are at risk each year. The big number is a mathematical artifact.

But the article treats this as a financial abstraction. It misses what the contracts cost in user goodwill. PainSignal tracks 31 distinct problems under "Contract Management" with an average severity of 3.6 out of 5. Users don't just complain about the term length; they report "hidden renewal clauses," "unpredictable price hikes," and "last-minute renewal surprises." These aren't just annoyances—they're strategic vulnerabilities that erode the desire to stay the moment a credible alternative appears.

Our data also captures 47 HCM-system problems, many specific to Workday, with severity ratings averaging 3.9. Comments like "HR system too rigid" and "implementation nightmares" are common. That's pent-up demand for an exit, not a happy base.

The Real Leading Indicator

Lemkin suggests net new customer growth as the best early signal. He's right, but there's an earlier one: user problem share of voice. PainSignal's database shows increasing mentions of "AI replacing ITSM" and "Workday alternatives" well before new logo growth decelerated. When customer frustration accumulates in public forums and internal surveys, the financial impact follows 12-24 months later.

Consider the 58 app ideas in HR tech tracked on PainSignal. Many emphasize month-to-month terms and no lock-in. That's not a coincidence. Smaller vendors are already exploiting the friction in ServiceNow and Workday contracts. They're growing by doing exactly what the incumbents avoid: offering flexibility.

What Builders and Investors Should Watch

If you're building an alternative to ServiceNow or Workday, your wedge isn't just better AI—it's freedom from contractual pain. Target the 31 contract management problems head-on: transparent pricing, simple cancellation, data portability. Your sales pitch writes itself.

If you're investing, don't trust blended GRR. Watch for the shift to shorter terms that Lemkin notes—ServiceNow's own 10-K reveals shorter deals in US Federal. That's a 12-24 month leading indicator of retention compression. But also track user sentiment in niche communities. Our data shows that platforms with high GRR but rising problem volume are ticking time bombs.

Lemkin's article is a crucial read. But pair it with ground-level signals. The contracts may hide decay for now, but the users are already telling a different story.