Do software renewals trigger feelings of dread, frustration, and stress? It’s no wonder—these crucial negotiations can significantly impact your higher education institution’s budget, operational efficiency, and technological advancements. Most institutions have great legal, procurement, and IT contract specialists who have ample skills in negotiating contracts of all kinds. However, many institutions lack the time and resources to effectively manage the volume of IT contract renewals.
Contract renewals fees are often the source of unexpected increases. When a vendor provides short notice, institutions may have difficulty funding unplanned increases. After helping colleges and universities successfully navigate software contract renewals for decades, here are a few tips to help you find common ground with solution providers.
Be prepared for conversations with your solution provider by addressing the following questions to understand and communicate where each party can add value to the relationship. Each situation is unique, so take or leave these questions as they relate to your institution.
Pro tips: Gather your contracts and determine the total financial commitment and spend with the provider. If you have an established relationship over multiple years, you may have many contracts to consider. Also, start early, a year or more out, for the most flexibility. Consider the length of the renewal term carefully. Depending on the provider, it may be beneficial to consider extending the renewal to cover the maximum term possible. One-year renewal terms are not reasonable unless the institution prefers a one-year term. To obtain long-term pricing, the institution may need to sign a long-term contract.
Pro tips: Using a software renewal to consolidate contracts can be a useful exercise that benefits the institution and the provider. You may be able to trade some of the maintenance increase for new products. To benefit the most from a renewal, the institution may need to increase the overall spending by increasing the user count (volume) or by adding new products. Most providers will not allow customers to decrease spending and receive price breaks.
Pro tips: You will be able to better negotiate if you are in good standing and can serve as a reference, or if you have a specific benefit to the solution and service provider.
Keep in mind that most vendors want multi-year maintenance renewal agreements, so they will charge more for single-year renewals to encourage multi-year renewal agreements. There are a few providers that are moving to one-year renewal agreements for all customers. Annual renewal agreements give the provider ultimate flexibility to increase renewal fees with little or no notice to customers.
If you have existing contracts without renewal terms, consider the value of negotiating guaranteed terms and maximum increases. Long-term contracts may not be in your best interest if you have concerns about the provider or their viability. Consider the time it takes to move to a new solution when signing renewal contracts.
Many of the questions above are relevant when your institution is unsure about remaining with a solution provider or knows it wants to switch to a new solution within a known time period. However, relationship management must still be a top priority.
You may plan to move to a new platform, but the decision is not final until it is funded, and the solution is fully implemented. Some institutions have planned to move away from a solution only to find themselves with the same provider many years later. Consider that you may rely on your current solution for a long time.
When moving off an existing platform, you will still need provider support and a solid long-term relationship. Transitioning from a solution provider to a new platform can take years. Depending on the solution and the institution, the transition to a new enterprise solution could take a minimum of 2 years and 5 years or more for very complex environments. To help mitigate risk, work to negotiate your longer-term maintenance well ahead of any decision, if possible, as vendors are unlikely to reduce maintenance fees while you transition to a new solution.
Going into software renewal conversations with a plan and an open mindset can help ensure a productive discussion rather than a dead-end one. Most providers understand that many institutions cannot take on maintenance increases that exceed the percentage increase in tuition. In some instances, institutions have severe budget deficits and operational risks associated with costs.
Providers may use support increases on older products to encourage customers to move to newer solutions. In most situations, your first point of contact is the sales representative, who has little to no control over discounts or concessions. However, they can be an entry point to escalate the conversation to managers and those who have the authority to modify agreements.
As institutions navigate the complexities of software renewals in higher education, a proactive and collaborative approach is vital. By focusing on strategic preparation, understanding vendors’ priorities, and fostering positive relationships, institutions can successfully progress through renewal challenges. Leveraging collaboration, open communication, and a proactive stance can pave the way for fruitful negotiations and enduring partnerships.
Need help with a contract renewal? Many Tambellini Group subscriptions include our Contract Review service. We often find items that should be struck from contracts or modified to reduce risk. Need more than just a review? We also offer contract negotiation services. Contact us to explore your options.
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