GRR and NRR Are Getting Harder for XaaS Companies

XaaS companies are facing sustained pressure on two of their most critical performance indicators: Gross retention rate (GRR) and net revenue retention (NRR).

In a recent virtual roundtable, Alexander Group gathered XaaS revenue leaders to examine what’s driving this decline, how the market has shifted and what high-performing organizations are doing differently to protect and grow revenue.

Retention Metrics Are Declining—And the Numbers Are Stark

Recent client data paints a clear picture. Over the past three years, average GRR has dropped from 92% to 86–87% and NRR has fallen from over 115% to 109%. For leaders already navigating 2026 revenue targets, this trajectory creates meaningful headwinds. The same growth assumptions that worked two or three years ago simply no longer hold.

For context, post-COVID NRR and GRR surged on a “growth at all costs” approach, peaking in 2021 at 121% NRR for application companies and 112% for infrastructure. Three years ago, top performers reached 170% NRR with an average GRR of 92%; but today, top NRR performers cap at approximately 120% and average GRR has eroded to 86–87%. The gap between then and now is significant—and it is reshaping how companies think about retention and expansion.

What’s Behind the Pressure?

XaaS revenue leaders consistently identify a range of compounding factors eroding retention metrics. Shifting XaaS budgets toward AI investments have redirected existing spend, while customer adoption gaps and product complexity are leaving value unrealized. Overselling and misaligned ideal customer profiles (ICPs) continue to introduce churn risk at the point of sale, long before a renewal conversation begins.

Broader market dynamics have only amplified these challenges. Tech stack consolidation, usage-based pricing models and outdated coverage frameworks focused solely on new logo acquisition have left renewal and expansion motions underpowered. Layoffs, budget constraints and rising customer acquisition costs have further altered the profitable growth equation, even as executive teams signal renewed focus on top-line growth.

How Leading Companies Are Responding

Leading technology organizations are re-evaluating how they go to market. Key strategic moves include:

• Concentrating coverage on high-value accounts by reducing account load for strategic reps, allowing for deeper engagement and proactive retention management.
• Embedding renewal responsibility into compensation plans to shift rep behavior from a “sell once” mindset toward long-term account health.
• Clarifying role ownership across adoption, expansion and renewal functions—ensuring no account falls through the cracks between customer success, account management and sales.

These are important first steps, but coverage model adjustments alone are rarely enough to move the needle on GRR and NRR. High-performing organizations are drawing from a much broader GTM playbook to protect and grow revenue.

Data Science as a Retention Multiplier

Beyond structural changes, leading companies are operationalizing retention and expansion plays through three emerging data science models:

• Opportunity Mapping identifies realistic expansion potential across the account base, helping teams prioritize where to invest time and resources. This model is the most widely budgeted and implemented of the three.
• Next Best Offer (NBO) Models surface the right cross-sell or upsell recommendation for each account, guiding reps toward high-probability conversations rather than generalized pitches.
• Churn Risk Models aggregate comprehensive customer engagement data—product usage, support activity, stakeholder engagement—to predict at-risk accounts before a renewal cycle begins, enabling precise and proactive intervention.

The Path Forward

XaaS companies that integrate data-driven guidance with focused execution on retention and expansion will be better positioned to navigate continued pressure on GRR and NRR. The companies pulling ahead aren’t just reacting to declining metrics; they’re building systematic, account-level plays powered by data science.

Alexander Group works with XaaS leaders to benchmark retention performance, design coverage models and build the capabilities needed to turn these insights into revenue outcomes. We also apply machine learning and AI to fundamentally change our GTM resources are allocated and improve yield.