Don’t be lazy: 4 Tips for Renegotiating a Technology Renewal
**I am not a contracts attorney and you should get one. I am just a guy who has sold colocation, cloud, hardware, software, consulting and managed services over the last decade.**
Ok, so you have some awesome service from your MSP, data center provider or telco and want to keep it…. Great. That right there is push that starts the downhill roll to laziness, overspending on services that you don’t need or are still priced like it is 2016 and opportunities to put cracks between you and your service provider. Lets face it, the sales rep would love a quick and easy renewal and you would too. However, there are people (like me, at no cost to you) who will happily come in, to ensure that both you and your service provider are set up for success for the next 3-5 years just like you were in the past.
So what do you really need out of the renegotiation process of your renewal? That answer is different for most but in the end boils down to the same main buckets…. same service, cheaper price/ less service, cheaper price/ more service, same or cheaper price. you get the idea.
Below are some suggestions on how you can best position yourself for that upcoming contract renewal.
Test #1, do you know when your contract end dates are? If not, I would start there and get your fingers hammering away at an excel file or something of the likes to make it easier to keep track. Make sure to get ahead of those now. Like 6 months or more now. Service providers want to keep your business and sometimes, they want to keep it so badly that they will “do you a favor” and put in the evergreen clause.
I can’t tell you how many times someone has told me that they don’t have auto-renew in their contract and that isn’t the case. It really takes away a lot of your leverage and can make this process that much more painful.
#2 – Understanding what you are paying for, what you need and where you are planning on taking your technology estate over the next term. Directionally this will set the North Star for the type of negotiation you want to have. If you want to stay with your service provider & just right size your environment, this is obviously a very different conversation than a situation where you foresee a data center getting decommissioned and wanting to shift out of a contract but need more time.
Getting this plan in place and then setting your objectives to your plan will help everyone be more successful in the negotiation.
#3 – Engaging your service provider. Ok, so you have done your homework, have the plan and now you are ready to start the game. Most service providers have account management teams that are not only trying to keep you as a client but also expand your presence. Working with these folks to identify ways in which everyone can win while staying true to your North Star is important here. Brokers (like me) should have relationships already with the service providers and know the incentives that they maintain for their account teams. This can help make the negotiation process move much more quickly with less pandering and fewer cycles to get you what you need, how you need it.
#4 – Updating terms & pricing. Let’s take the example that you have a colocation renewal coming up Jan 2021 for a deal that was originally signed on a 3 year term. Benchmarking and general market knowledge is going to tell us that the price for your services have consistently decreased in cost to serve over the last 3 years. Unlike the big cloud providers, you data center provider most likely isn’t going to just start cutting your bill as costs for their new clients decrease.
This portion of the effort will also be tied to the gives and takes as it relates to retooling the technical/service offerings you receive every month. Sometimes, account teams are incentivized heavily on keeping the monthly recurring revenue where it stands and will more aggressively add services than reduce cost. Others may have monthly or quarterly goals based on bookings. Keeping all of the levers that you have at your disposal is very helpful at this stage. Doing this dance properly has allowed me the ability to save my clients 30-50% off their monthly bills while maintaining the same or higher levels of service than they had before.
Terms are also important at this stage. Doing things like removing unwanted clauses, getting the ability to renegotiate pricing at future checkpoints and turning down services as you need are a few examples updates that I see requested regularly.
Just like most things in life, knowing the facts, understanding the game and having the right people/resources will help make you successful as you continue to evolve with the business. Whether you are trying to free up additional capital for other projects, lower your cost to serve or just get a renewal done, our team is happy to assist you with the process. Many times we can provide this support to you, regardless of service provider, at no additional cost to you.