In 2023, the tech sector is seeing shrinking growth, pressure on profits, and price hikes. Understandably, there are a lot of questions around what these price changes mean, as well as how contract negotiations should be approached amid this uncertainty.

New Prices And New Options

There have been reported price hikes across the software industry — both announced and unannounced. For example, Microsoft announced an increase to Microsoft 365 pricing in late 2021. Other vendors’ price increases have been reported more anecdotally by clients. Higher prices are not the only thing that is changing, though. Many large software vendors have introduced bundles to simplify buying. These bundles can offer price advantages in the right circumstances. Beware of being tempted into buying more than you need.

With higher prices and more options, buyers are left wondering how they can best maximize value for the dollar and whether it may be time to switch vendors. If your organization decides to make the switch, make sure to implement a best-in-class contract negotiation strategy to get the most out of a software purchase.

Follow The Rule Of Three For Contract Negotiation Success

Technology buyers should incorporate three main best practices into their contract negotiation strategy to ensure success: Start negotiations during product selections, focus on building long-term relationships, and compromise for better outcomes.

  1. The early bird gets the worm: Don’t wait until a vendor is selected to start the negotiation process. Not only will this leave buyers with less leverage, it may also be too late to back out if contractual problems are discovered. Be up front with requirements, and make sure to do your homework — is what is being promised actually true?
  2. Take the long view: Technology contracts are the start of a long relationship. While you don’t want to lock yourself into a contract that is too long, establish an understanding that the relationship has the potential to be indefinite, as long as it remains mutually beneficial. Build in flexibility, and set guidelines for how the success of the relationship will be measured.
  3. Reach a happy medium: A contract that is mutually beneficial will require some compromise. Decide how much each line item is worth to you, and be realistic about whether a vendor would/could grant these demands. Determine what fair swaps would be, and then rank your list. Take into consideration not only what is nonnegotiable for yourself but also what you predict would be nonnegotiable for your vendor.

To learn more about software pricing trends, read the Forrester report, Software Pricing Trends, 2023. To learn more about contract negotiation best practices, read Strategies For Technology Contract Negotiation.