Taking advantage of software offerings means looking beyond price

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Your company’s software license renewal is coming up and you expect tough contract renegotiations. The company wants to add more licenses and new products, but they also expect a potential price increase. You haven’t budgeted heavily, but you want to empower your team and ensure you’re getting the most from your software investment.

So, before you sign another multi-digit deal, stop and ask yourself these key questions:

1. Are we proactively preparing? Make an effort to move forward and control the dialogue from the driver’s seat instead of waiting for the seller to come to you with an offer to proceed with terms that require a price increase. Position your organization to proactively define what you want from your renewal. It’s also important to align with your marketing, sales, procurement, and IT leaders to develop a solid communications strategy to control messaging during negotiations.

2. What are we really using? Perhaps there are glaring opportunities due to a roadmap change, or your last renewal involved purchasing a new product that didn’t result in full user adoption. Often the possibilities are more subtle, with core products requiring constant addition of new users, giving the impression of growth, but in fact there are a number of licenses that are not commonly used that were previously deployed. Work with the provider to understand login metrics such as frequency and time in the tool. While a certain level of unused shelf stock brings deeper discounts, there’s a balance to achieving healthy sizing for your user base.

3. What do we really need? Develop a bottom-up forecast from scratch, then compare the estimates to your existing environment. Challenge your ability to correctly size your license editions. Distinguish the necessary from the nice add-ons, and be careful when including every possible add-on option in your first request. You don’t want to anchor high and then spend the rest of your negotiation trying to get dollars back.

4. Are we bringing all our bargaining chips to the table? Make sure you have an overview of your entire technology stack and roadmap. If there are different order forms for some software, consider merging them. Conversely, if you can seriously consider or credibly threaten BI and collaboration platforms, you can have leverage.

5. Are we protecting ourselves for the future? Think about how your software usage might change between the time you sign your renewal form and the 1, 3, or 5 years until your contract expires again. Do you need the flexibility to swap out products? Will you be selling or migrating users, making license portability critical? Consider scenarios that will impact your business and user base, and remember that it’s generally easier to add licenses along the way, provided you’ve set strong expansion pricing. Finally, don’t forget to hedge at the next renewal so you don’t face undefined price increases.
Your software license renewal may result in a favorable outcome. You may have more impact if you are willing to do the right things to prepare yourself properly in advance. The right outside consultant can provide you with invaluable help and, in many cases, result in a significant return on your software investment.

Virginia Lantz is a director of the Insight Sourcing Group, where she leads the company’s IT sourcing practice. Virginia is focused on delivering value through IT procurement opportunity assessments and strategic procurement that cover all areas of IT spending. She can be reached directly at .(JavaScript must be enabled to view this email address).

November 14, 2022

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