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As the COVID-19 crisis continues to wreak havoc on the global economy, subscription, support, and maintenance contracts are still coming due. TSIA is hearing from its member companies that the procurement agents responsible for negotiating these renewals are asking for all sorts of concessions.
In some cases, they are asking for extensions, claiming that all purchases are on hold as they wait for the crisis to lighten up and their own revenue to start to trend upward. In other cases, customers may be asking for major concessions and discounts, as they know that vendors may also be under pressure and open to cutting prices to keep them on their platforms.
Read on for a few helpful hints on how to hold the line against extensions and discounts in your renewal negotiations, and for an opportunity to participate in TSIA’s “Temperature Check” quick poll on renewals impact.
Before you consider renewing your customers on your current offerings, consider making a big move. If your company offers both traditional transactional/perpetual license offerings AND subscription-based XaaS offerings, an under-duress renewal is perhaps the best time to drive the customer onto the new platform. Not only does it benefit your company as XaaS is clearly the industry-wide engine for growth, but it allows the customer to stay on the platform by receiving more value with less upfront cost. They will only be paying a portion of the contract upfront, and will likely pay for only the capacity they need. Over time, your company will reap the benefits of your migration to subscription models.
For a better understanding of why XaaS is the fuel for growth, especially in a down market, listen to this presentation from TSIA’s TSW Live! virtual conference.
Remember that procurement agents are highly-trained negotiators, specializing in getting their vendors to lower their prices. They understand how to utilize every lever they might possess, and the COVID-19 crisis provides plenty of leverage. Remember, though...it’s not personal. They are just doing their jobs, and you’d want your own procurement agents to do the same thing.
Here are a few ideas on how to get your renewals done on time and without extensive discounting:
Our customers buy our products and services to achieve a vision for the future. That vision does not go away just because the economy tightens. Now more than ever, the role of CSMs, Sales executives, and Renewal Specialists is to promote the value proposition and focus on a win / win scenario.
It’s totally acceptable to give a favorable term in exchange for a commitment for the future, such as:
You are helping them to remain a great customer while they are helping you be a strong supplier. This relationship cannot be a winner / loser scenario if we are to sustain the relationship over a long lifecycle.
TSIA has the ability to quickly and accurately survey the technology industry on relevant topics. Take this quick poll on renewals impact to get real-time feedback on how the industry is trending, how their renewal rates are holding up, and what (if any) concessions they are making to secure their renewals. It should only take about three minutes to complete. As with most TSIA research, you’ll get a lot of useful insight for a very minimal commitment of time and effort.
We understand that our member companies, the technology industry, and the world at large have been impacted by COVID-19. Whether you are prepared for Revving or Retooling, now, more than ever, we need to work together to get through these challenging times. TSIA is committed to providing visibility as quickly as possible into the changing industry trends and practices that come as a result of COVID-19. Visit our Rapid Research Response Initiative resource page for more information.
If you have any questions related to how COVID-19 is impacting your organization, we’re here to help.
Post Date: May 13, 2020
Jack Johnson is the vice president of service revenue generation research for TSIA. In this role, he works closely with member companies to deliver research and advisory programs focused on helping them optimize their renewal organizations and effectively deliver revenue outcomes. Throughout his career, he has held Renewals, Customer Success, and Operations leadership positions at technology companies providing enterprise software or hardware, or in business services companies helping technology companies growing recurring revenue.
The Technology Services Industry Association (TSIA) is dedicated to helping technology and services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.