8 Best Practices for Renewing Software Maintenance Contracts
Navigating the maintenance contracts renewal process is one of the most difficult aspects of your job. However, it’s also one of the most important. Because if you aren’t deliberate and strategic in your approach, overspending is all but guaranteed.
There are few areas in which this is more evident than software support and maintenance contracts. Most organizations renew them with little thought or oversight. Don’t make the same mistake.
Here are eight best practices for software maintenance contracts renewals — and IT contract renewals as a whole — that you should follow as a mid-market/enterprise FMV.
1. Start By Examining What’s Yours
Prior to renewing maintenance contracts agreement, look internally at what you own. A thorough account of your entitlements, inventory, utilization, consumption, and support requirements acts as a crucial foundation when negotiating terms. More importantly, this assessment also helps you identify the business value of your contracts.
You’ll want to collect the following information:
- A complete history of your maintenance payments and purchases.
- Current and historic terms and conditions.
- Current and historic contracts.
- Relevant tools and platforms in your environment.
- How those tools and platforms are being utilized, and by whom.
- Resource consumption.
- A roadmap of updates, upgrades, or decommissioning plans.
2. Formalize Your Contract Assessment Process
Once you’ve a clear picture of your business’s operating environment, the next step is to leverage this information in a full assessment of your maintenance agreement. Your goal here is to establish a standardized, repeatable process that answers the following questions:
- Is this contract necessary? Why or why not?
- How can we replace this contract?
- What can we replace this contract with?
- What changes has the vendor recently made, and how does this impact our agreement?
- In what ways does this contract currently provide value?
- What areas of this contract need improvement?
3. Plan Ahead, and Create a Sustainable Timeline
Start asking questions and engaging internal stakeholders well in advance of your contract renewal date. The goal is to bring decision-makers to the table early enough to ensure your internal channels are all aligned, while also leaving you with enough time to align with the vendor.
For mission-critical contracts or big agreements with tier one vendors, you need a strategy in place six months to a year in advance. Tier two vendors are somewhat easier to replace, though you must still plan in advance — 30-120 days, at least. In both cases, you must leave yourself with plenty of runway to change your deployment, modify your agreements, find new vendors, and migrate as seamlessly as possible.
And in both cases, if you don’t leave yourself with enough time, you hinder your ability to execute a renewal (and may even disrupt operations).
4. Always Look to Optimize
Contract renewals aren’t solely a chance to improve your terms and get more value out of your vendor relationships. They’re also an opportunity to upgrade and improve your infrastructure.
You might be able to consolidate several services offered by tier two vendors onto a single tier one vendor — and in so doing, reduce cost, complexity, and your overall attack surface.
5. Timing is Everything
Get aligned with your vendor as soon as possible, within a six month window prior to renewal at the absolute latest. An early renewal represents your best chance of bringing discounts to the table, but only if you engage with the right people at the right time. This also lets you more accurately feel out what the vendor has done or how the vendor has changed since the last renewal.
If possible, start your negotiations as close to the vendor’s end of quarter or year end as possible.
This is another easy way to unlock savings. Vendors and sales teams looking to pad numbers will be far more eager to sign deals and offer potential discounts.
Related: Download our Vendor Year-End Timeline Report to stay on top of key timelines for popular vendors.
6. Budget for Inflation
Between the ongoing recession and continuous inflation, price hikes and bumps are inevitable. It’s important that you’re aware of them and work them into your budget. To that end, you must also seek assessment numbers from the vendor at least 120 days before the renewal.
The degree to which you’ll see costs increase largely depends on your vendor. Some vendors increase prices by 15-20% annually, while others might up the bill by 10% three or more times a year. In addition to preparing yourself with a padded budget, awareness of these increases can also help lower costs elsewhere.
7. Bring In a Consultant
After budgeting, it’s time to bring in a consultant. An expert agency to act as a liaison between you and your vendor, protecting your best interests and getting you the most favorable terms possible. This is something 3Quotes is very good at doing.
By combining comprehensive real-time market data with our own deep expertise, we can unlock upwards of 20% in savings through negotiation alone. If you need an example of how that looks in practice, look no further than First Capital REIT. We helped this mixed-use real estate owner, operator, and developer not only save $750,000 on IT solutions, but also connect with the perfect Microsoft reseller.
And we can do something similar for you.
8. Stack the Contract In Your Favor
Don’t be afraid to request the addition of more favorable terms and items on your contract. Your goal is to make this contract as favorable to your business as possible. Packing it with value adds is the best way to achieve this.
They don’t need to be large asks, either — they could be simple things like:
- Future proof pricing.
- Additional sandbox licenses.
- Additional development licenses.
- An extra service offered at no additional cost.
Even if each add is individually quite small, they add up fast.
The Takeaway? Timing Matters When it Comes to Software Maintenance Contracts Renewals
Why pay more for the software contracts your business needs to operate? By negotiating early, you give your business substantial leverage in the negotiation process, ensuring you have the best chance of securing a favorable deal.
Having said that, you should also consider the following:
- Know your environment, contracts, and agreements.
- Standardize your contract assessments.
- Plan and discuss everything well in advance of your renewal date.
- Be on the lookout for optimization opportunities.
- Engage your vendor as early as possible, and as close to their EOY/EOQ as possible.
- Bring in a consultant to negotiate and advocate for you.
- Look to wrap in as many value adds as possible.
Follow these steps, and your contract renewals can go from headaches to genuine business opportunities.
Need help securing the best deal during your 30/60/90 window? Book a discovery call with 3Quotes today to learn more about how we can help you save 20% or more on your IT contracts.