Early Renewals: IT Cost Savings Friend or Foe?

By Tricia Peck

Program Manager, NPI

December 06, 2017

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NPI clients sometimes receive unsolicited early renewal offers from vendors. Are they an opportunity for IT cost savings, or an opportunity to overspend? 

Here are 5 questions to ask upon receipt of an unsolicited early renewal offer to help you determine the best and most cost-conscious path to renewal:

1. Why might this vendor be pushing for early renewal?

Find out what’s going on with the vendor. Do some research with credible market sources to understand the vendor’s market activity, financial status and recent behavior. Determine what leverage might be on your side of the table for a near-term purchase.

2. Does this offer align with my technical roadmap and usage requirements?

Vendors love to take advantage of a renewal opportunity to sell a new bundle, enterprise agreement or solution offering. Is this offer inflated with products and services you don’t need?

3. Is my organization able to consider an early renewal?

Before you dig into the details of an offer, consider whether an early renewal is even an option. Perhaps the important stakeholders are involved in other key projects or there are big technical or usage uncertainties on the horizon that won’t be solidified in the timeframe required. Budget limitations may also prevent taking early renewal action. Sometimes it’s necessary to let the offer sit on the table for now and revisit it when you have resources.

4. How does this offer stack up against fair market value?

Early renewal offers may or may not include cost savings. Perform price benchmark analysis to determine how the offer compares to best-in-class purchases in the market.

5. How does this timeline affect negotiations?

If you decide to move forward with the early renewal, it’s important to use the timeline to your advantage. Get your buying team aligned around a negotiation strategy, map out your most desired outcome, anticipate the vendor’s moves, and send the right messages at the right time.

Navigating any renewal can be tricky, but receiving an offer when you are unprepared for it can lead to overbuying and overspending. Ensure that early renewal offers are carefully analyzed according to organization needs, vendor position, usage requirements, fair market value and timeline considerations.