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How to Avoid Overspending on Your HCM Renewal

Human Capital Management (HCM) software is mission-critical, and increasingly expensive. As global organizations invest more heavily in workforce analytics, payroll modernization, and talent management, vendors are reaping the benefits. In fact, Gartner estimates that spending on cloud-based HCM solutions is growing at nearly 20% annually, outpacing many other enterprise IT segments.

But while vendors celebrate ballooning revenue, many enterprises are quietly overpaying. 

At NPI, we’re seeing clients overspend by 10 to 30% on HCM purchases and renewals. With providers like Oracle Fusion, UKG/Kronos, ADP, SAP SuccessFactors, and others, the complexity of agreements (and the opportunity for waste) has never been higher.

If your organization is approaching an HCM renewal, here’s how to protect your budget and extract more value.

Start Early

Timing is everything. Engaging your HCM vendor six to nine months before your contract end date gives you the leverage to evaluate usage, collect benchmarks, and explore alternative solutions if needed. Too many companies wait until 60 or even 30 days out, which forces them into a reactive negotiation posture. Starting early puts you in control.

Beware of the Bundle

Bundling can sound like a cost-saving play, but in reality, it often locks customers into inflated renewals. Vendors package underutilized or redundant modules alongside core services, making it hard to disentangle what you actually use. 

NPI routinely identifies 15% or more in waste tied to bloated HCM bundles. Scrutinize each line item – and don’t be afraid to push back on legacy components you no longer need.

Leverage Competitive Incumbents

It’s true that switching HCM vendors is a heavy lift, but that doesn’t mean your HCM provider should get a free pass. If you use SuccessFactors but are also an Oracle customer, there is leverage there – as long as you can demonstrate a credible threat. 

Use your current spend data, operational feedback, and competitive intel to challenge pricing, terms, and service levels. Even if you’re not actively evaluating new vendors, a well-informed “what-if” conversation can shake loose better discounts and concessions.

Know Your Limits (and Theirs)

Without market visibility, it’s hard to know if you’re getting a fair deal. Vendors thrive on pricing opacity, and discount structures vary widely. NPI helps clients understand where their deals land relative to peer benchmarks. That clarity is critical in knowing when to stand firm and when to accept an offer that’s genuinely competitive.

Negotiate for Lessons Learned and Future Leverage

Every renewal should be a post-mortem on the last. Or, in the very least, a checkpoint rather than just a transaction. If past implementations fell short or certain modules underdelivered, now’s the time to negotiate for make-goods. That can look like additional training, support upgrades, or contract flexibility going forward. Don’t leave value on the table by ignoring what didn’t work the first time around.

Analyze Usage and Get Your House in Order

The best-negotiated contracts fall apart when internal alignment is lacking. HR, IT, procurement, and finance all have a stake in HCM decisions, but they often approach renewals in silos. Consolidate usage data, identify must-have features, and agree on success metrics before you engage the vendor. A united front makes for a stronger negotiation and better long-term results.

HCM Renewal Savings in Action

NPI has helped hundreds of enterprise clients optimize their HCM renewals by recovering wasted spend, right-sizing bundles, and negotiating smarter terms. Examples include:

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