Your company’s software license renewal is right around the corner, and you are anticipating a tough contract re-negotiation. The business wants to add more licenses and new products, however, you’re also expecting a potential price increase. You have not budgeted for a larger deal, but you want to enable your team and ensure you’re getting the most out of your software investment.
So, before you sign another multi-figure deal, stop and ask yourself these key questions:
- Are we proactively preparing?
Strive to get ahead and control the dialogue from the driver’s seat rather than waiting for the vendor to come to you with a proposal to continue with terms that require a price increase. Position your organization to proactively define what you want from your renewal. It is also critical to align with your marketing, sales, procurement and IT leaders to establish a solid communications strategy to control messaging during negotiations.
- What are we truly using?
Maybe there are glaring opportunities due to a roadmap change, or your last renewal included the purchase of a new product that has not led to full user adoption. Often, the opportunities are more subtle with new users consistently needing to be added to core products, creating a perception of growth, but really there is a swath of licenses that are not being used frequently that was previously provisioned. Work with the vendor to understand login metrics such as frequency and time in the tool. While some level of unutilized shelfware will garner deeper discounts, there is a balance to achieving healthy rightsizing for your user base.
- What do we really need?
Develop a bottoms-up forecast from scratch and then compare the estimates to your existing environment. Challenge your ability to right-size your license editions. Distinguish the necessary from the nice-to-have discretionary items and be cautious about including every possible add-on option in your initial ask. You don’t want to anchor high and then spend the rest of your negotiation trying to walk back dollars.
- Are we bringing all our leverage to the table?
Ensure you are looking at your full technology stack and roadmap. If there are disparate order forms for some software, consider bringing them together. Conversely, you may have leverage if you are seriously considering, or can credibly threaten to BI and collaboration platforms.
- Are we protecting ourselves into the future?
Think about how your software usage may change between the time you sign your renewal form and the 1, 3 or 5 years until your contract is due again. Will you need the flexibility to swap out products? Will you be divesting or migrating users such that license portability becomes critical? Consider scenarios that will impact your business and user base and keep in mind that it is generally easier to add licenses along the way, provided you have established strong expansion pricing. Finally, don’t forget to protect yourself at the next renewal so you aren’t exposed to undefined price increases.
Your software license renewal can yield a favorable outcome. You may have more leverage at your disposal if you are willing to do the right things to properly prepare in advance. Having the right outside counsel to help guide you can provide invaluable assistance and, in many cases, it can lead to a significant payback on your software investment.
Virginia Lantz is a director with Insight Sourcing Group where she leads the firm’s IT Sourcing Practice. Virginia focuses on delivering value through IT procurement opportunity assessments and strategic sourcing addressing all areas of IT expenditures. She can be reached directly at vlantz@insightsourcing.com.