Enterprise IT buyers are no stranger to software price increases these days as most vendors have raised rates on incumbent solutions to drive revenues higher. In some cases, the scope of these rate hikes is justified given external economic factors like inflation and supply chain disruptions. But there are other times when the scope is beyond justification. Smartsheet’s recent price increases are a good example of the latter.
The rate of renewal increases for Smartsheet’s popular project and portfolio management (PPM) solutions has been noticeably high lately. Standard price hikes of 3% to 5% year-over-year have given way to stratospheric increases of 30% to 50% in some instances. That’s nearly 10x higher than expected standards.
What’s Driving Smartsheet’s Price Increases?
NPI has identified two main factors driving Smartsheet to raise prices at such alarming levels. The first is pricing disparity for Smartsheet’s Enterprise license, despite the vendor’s reputation for offering deals at or near list price. The second is the introduction of “connected user” licensing tied to tangential system usage.
Historically, Smartsheet has had a reputation for offering its main Enterprise licensing close to list price with near-zero discounts, even in larger deals. Recently, however, NPI has observed notable pricing disparity on some deals. This should be a red flag for customers who are assuming Smartsheet is taking a status quo approach to how it prices new purchases and renewals.
In addition to harsh pricing on the main Enterprise subscription, Smartsheet has introduced “Advance Plans.” Available in three editions (Silver, Gold, and Platinum), these plans offer attractive new features and usage rights. Smartsheet’s Advance Plans count “connected users,” which the vendor defines as the total number of licensed users, internal collaborators, or previously-licensed users. But many customers have found the definition of these users to be murky.
To mitigate (or neutralize) the impact of higher Smartsheet pricing and licensing changes, NPI recommends three tactics when purchasing or renewing with Smartsheet:
Determine Fair Market Value Price Targets for Current and Upcoming Smartsheet Price Proposals
For Enterprise subscription customers, the main challenge in negotiating a good deal with Smartsheet is determining what’s a fair price and where the vendor is negotiable. Although Smartsheet continues to offer list price on many enterprise-sized deals, NPI has seen fluctuations in the pricing trendline across the larger volume of data points we track.
Customers purchasing or renewing with Smartsheet should perform IT price benchmarking to determine if current deal pricing is within fair market value range. The precision of this exercise allows customers to aim for a definite mark on the fair market value spectrum instead of simply guessing what’s possible. Those that don’t can expect to pay above market price – a move that could become the baseline for higher pricing in future renewals.
Review and Challenge “Connected” User Counts
Connected users represent the tangentially connected users that may access parts of Smartsheet’s subscriptions. However, NPI finds that Smartsheet will at times overinflate the figures for connected user counts. Because of this, NPI recommends validating any concerns and challenging counts when Smartsheet may be overstepping bounds for what it counts under new Advance Plans. NPI also recommends seeking proposals for at least two of the main Advance Plan options to contrast and compare options.
Evaluate Competitive Alternatives
Should Smartsheet prove resistant to price reduction efforts, NPI recommends considering RFP activities to see if alternative solutions could add leverage to negotiations. This can be a lengthy process, so it requires advance planning ahead of any renewals and/or new deals.
Push Back Against Smartsheet Price Increases
As Smartsheet’s pricing and licensing evolves, it’s important for customers to have a strategy in place to systematically minimize or neutralize any negative impacts on their spend. IT price benchmarking is one example of a simple tactic that can yield material savings. Challenging opaque licensing policies is another example – there are plenty of instances where vendors inaccurately categorize users resulting in customers paying for more costly licensing.
Do you have a Smartsheet purchase or renewal planned in the coming year? NPI’s IT price benchmarking services can help. Contact us to learn more.
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