5 Questions to Ask Before You Sign That Software Renewal

by Ben Petree | IT Center of Excellence

Many companies overpay for their software needs.  It’s easy to do when suppliers dangle attractive deals on oversized software bundles, deeper discounts for extra licenses or seats, “must have” technical support or professional services, or “free” features or service upgrades with costs that kick in later.  And if you don’t buy extra licenses now, they will warn you of ominous scenarios and steep costs to add features later.  Best to be safe, buy extra now.

Companies also overpay because things change, or supplier products don’t live up to expectations.  Some buy more than they need for ambitious deployment plans that are delayed, downsized, or cut short.  Others buy premium features, bundles, or user seats that aren’t needed or sit idle.  And yet others sign up for premium support or services plans that go underused.

The cost burden of annual software renewals really adds up over time.  Whether considering support for perpetual licenses or annual renewals for software subscriptions, companies in most cases resign themselves to a life of lock-in without questioning.  Or worse, they get hit with escalating costs for the same software platforms, year after year.

So, what five questions do you need to answer before you sign that software renewal sitting on your desk?

1. What have we bought?  This isn’t necessarily a simple exercise, but it also doesn’t mean you have to figure it out on your own.  Ask your supplier for their documentation, be it a licensing summary, an installed base spreadsheet, a support entitlement report, an annual purchases recap, a compilation of invoices, or other purchasing related information.  Check your contract pricing, discounts, and terms against their invoices, records, and renewals.  Chances are that this exercise will raise more questions that need to be answered.  But at a minimum, you will be armed with the facts before uncritically accepting the contents of that renewal agreement.
    
2. What are we actually using?  Most supplier account teams want to avoid this topic entirely.  But there can be significant renewal savings to be found in your usage reporting.  Sometimes suppliers have portals that track this information in detail, or companies have tools that search IT environments to inventory software installations and usage, or a simple last-login date report can uncover savings opportunities.  If you can’t get the data yourself, ask the supplier, and don’t let them off the hook, particularly if they stall or pushback!  Finally, consider the opportunity to conduct a simple survey of users and needs – this can uncover (and has uncovered) six figures in annual renewal savings for companies.
    
3.  What do we really need?  The answer to this question helps companies to make sense of past purchases and current usage.  Suppliers will have more than one way to license their software which can take the form of bundles, editions, user types, data access, compute power, storage limits, feature restrictions, and more.  Spend time with IT, business user groups, your reseller (if any), and your supplier to sort out the best fit for your needs, actual usage, supplier offerings, licensing options, and their best available pricing, discounts, and promotions.  Study what fits in your environment and gives you flexibility as you change and grow.
    
4. What’s important to the supplier?  It’s easy to forget that suppliers need to sell you more of what they have, and they reward their sales teams handsomely for deals with more licenses, more products, and more services.  Sales teams are particularly incentivized to push new or promoted products and bundles.  This model doesn’t reward a straight renewal at the same cost as last year, and it can be punitive in scenarios where you are descoping spend and licenses.  Companies can find value by taking the time to work out what a supplier wants to sell them this year, understanding the potential fit for purpose, and evaluating supplier offers or incentives that also might include some relief for current software renewals. 
    
5. What are our alternatives, both now and in a few years?  Alternatives often are limited in the short term, i.e. within six months of renewal date.  But if you don’t look at this year versus 2-3 years out, alternatives will always be limited, and potential supplier renewal savings will be overlooked.  Companies can regain leverage with periodic reevaluations of incumbent versus competitive products, and can selectively conduct a recompete of incumbents against each other and non-incumbent suppliers.  Even the threat of such a process acts in favor of companies that are willing to invest the time in staying ahead of incumbent supplier advantages. 

Software renewals don’t have to be a mystery, and companies actually have more leverage at their disposal if they are willing to do the right things to properly prepare in advance.  Having the right partner to help guide you through software renewals can provide invaluable assistance.  In many cases, there can be a 2x-5x payback on that investment.  Before hiring a partner, be sure to quiz them on their process, tools, experience, and willingness to go the extra mile for your software renewal needs.  Good luck and happy renewals!