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The Ins and Outs of the Negotiation Process During a Contract Renewal

January 27, 2021

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There are times in life where you walk into a room ready to negotiate.

Whether it’s when you’re negotiating the price of a new car you’re interested in or talking to your manager about your salary increase in the new year, you'll need to flex your negotiation skills.

Whatever the case may be, it’s important to do your research before negotiating. In this case, maybe you’re preparing to have talks with your vendors regarding a software contract. For that, you need the data that awaits you within a SaaS management tool like G2 Track.

If you’re about to start the software negotiation process at your organization, you need to know the ins and outs of what to be prepared with ahead of time, the details that often go missed, and the mistakes that are often made. This is why you need to learn why G2 Track is your must-have tool to be armed with during negotiations. 

Everything you need to know when negotiating a software renewal

Before you can begin negotiating a software renewal, there are specific details that you should be aware of. Let’s go over every detail you and your team should be caught up on ahead of the negotiating meeting. 

  • When it’s set to renew: Is the software contract set to renew next week, month, or quarter? It’s crucial that your team keeps an eye on the renewal dates for all of your software solutions.
  • Cancellation period: This is the period of time that you’re allowed to cancel or make adjustments to the contract. This is important because while some contracts require a 30-day notice, some require 90 days.
  • Contract owner: Figure out who within your organization is the contract owner so they can be a part of the conversation and decision process for either renewing, canceling, or adjusting the current terms.  
  • Does the software auto-renew: Sometimes software that renews automatically can take you by surprise. Be sure to double-check if the clause states whether or not a tool auto-renews, as well as the term length of the auto-renewal. For instance, if you sign a 3-year contract, will it auto-renew for one year or another three years?
  • Employee sentiment: Do you know for sure how your team feels about using a certain application? When you utilize user sentiment data, you can pinpoint if they don’t enjoy using a specific software tool. This allows you to capture the necessary feedback needed to show the vendor where they aren’t delivering and can make it easier to negotiate a lower price. 
  • Utilization: Does your team actually use the software you’re paying for? When you take a look at utilization, you can see which tools are being used every day, and which applications are going months without anyone logging in.
  • Multiple contracts with the same vendor: If your organization is paying for more than one software solution from the same vendor, consider finding out if you can consolidate for better pricing before resign for one or all of these products. 
  • Visibility into overlap: It’s common for businesses to be paying for various SaaS tools, used by different departments, that do the same thing. When you know where there’s feature overlap, you can decommission one of the tools and decide not to renew to save money. 
  • Benchmarking data: How can you truly know if your team is getting a good deal on the software you’re using? When you have access to benchmarking data, you can see how the price of your contract stacks up against similar companies within your industry.
  • Fiscal year-end date: Do you know when the fiscal year ends for the vendors you work with? When you do, you can wait to have the contract negotiation conversation until right before it ends, giving you a better chance of obtaining a discount. 

69%

of software contracts have an auto-renew clause and a notice period for cancellation between 30 and 90 days.

Contract details that often go missed

When you take a deep dive into the details of a software contract, there are certain details that people tend to miss. 

For instance, always take the time to note any contractual language that references the price and whether or not it can be increased as time passes. Find out if the price can be increased and if there’s a range of an acceptable increase. This clause is often hidden toward the end of a contract, so be sure your team pays special attention to the context surrounding price increases. 

You should also make sure your team takes the time to look at the renewal length term. It’s common for many teams to assume the renewal term is only for one year, regardless of how long you signed the initial agreement for. If you sign for a three-year term, it may renew for three more years instead of one. If this detail goes missed, you could be stuck using a tool for longer than you'd like.

Another contract detail that not only goes missed but your team may forget to bring it up during negotiation is whether or not your team can get a better price if you sign for a longer term. Negotiating price is all part of the process, so don't forget to ask before signing.

Finally, you don’t want to miss out on the opportunity for access to the newest versions of the software you’re paying for. Tools within your tech stack may renew on their own, but not for the latest and greatest versions. If there’s a newer version of an on-premise application that your team is using, see if it’ll be automatically part of your stack or if you’ll need to pay an extra fee for it.

Keep an eye out for these details ahead of the negotiating process so nothing slips through the cracks. 

Common mistakes when negotiating contracts

In addition to details going missed, there are other mistakes that are often made during the process of negotiating a software contract. 

Consider what it means to be a smart negotiator. A smart negotiator will always ask for multiple options – especially when it comes to the price. When negotiating, it’s common to want more insights regarding price and you may ask for pricing ranges for one year, three years, and five years. 

Depending on how much the vendor reveals during this conversation, you may be able to get a better sense of their pricing floors. When you have this information, you know what you can try to negotiate down to.

Additionally, it’s often a mistake not to ask about add-ons within your contract. For instance, let’s say your team is interested in Software X, which is listed as $5 a user. The vendor said that if you buy 1,000 licenses, you can instead have them for $2 a user. What would happen if you call back in six months asking for more users? Will they be sold to you at $5 or $2? Because a volume discount is often not in the contract, be sure to ask about add-ons.

How to use G2 Track when negotiating contracts

One of the great things about using a SaaS system of record like G2 Track is that it simplifies all the data you need before going into a software negotiation.

In the easy-to-read dashboard, your team has every last detail you’ll need.

For instance, unsure when a contract is set to renew? Just click on one of your SaaS applications and you can see the start and end date of each of your contacts. You’ll also see if it auto-renews on its own, if you’ve switched the renewal reminder to “On,” and who the owner of the contract is.

G2 Track Contract Owner
Want an overall view of your SaaS applications? G2 Track can give you that too, as it’s easy to see how many contracts you have scheduled to renew in the upcoming months.

Upcoming software renewals

To get down into the real details of how your team feels about each SaaS tool, there’s the sentiment hub. Once you send out the pulse survey, this dashboard will provide you with the Net Promoter Score of every application. 

G2 Track sentiment data

To put it simply, every last detail you need to be armed with walking into a software negotiation process awaits within G2 Track. Without this data, you could wind up overspending and with far too many licenses than your team will ever use.

A smarter way to negotiate

Thanks to G2 Track, you can be sure your software negotiations always go as planned. You’ll be prepared with the necessary data to help you spend money on only what is absolutely necessary for your team to succeed, so nothing goes missed and no mistakes are made. Without G2 Track, you might as well be going into negotiations blind.

Ready to be fully prepared ahead of your software negotiations? Let G2 Track Essential help you negotiate with confidence, for free. 

G2 Track Essential

Learn more about your contract details

Take advantage of all of the data G2 Track Essential provides ahead of a software negotiation, for free.

Manage your software costs with G2 Track.