When it comes to renewing IT contracts, cost optimization is typically top of mind. While there are several ways to approach renewal negotiations, the most effective means to achieve long-term cost-savings is by leveraging a comprehensive future demand roadmap. Why? It’s the key ingredient in a recipe to maximizing your cost optimization opportunity and producing a ‘win-win’ scenario for both parties.
Competitive bid or sole source negotiation?
If your provider has not been performing or your future demand isn’t best aligned with your provider’s strength and experience, the more common competitive bid or RFP approach is best. But this approach could make the negotiation more difficult as it instantly puts your incumbent vendor on notice. The provider may respond with discounts but you can be sure they will do their best to win in other areas of the contract that favour their best interests. They might include annual COLA increases or uncapped time and material-based Statements of Work (SoWs), for example, that can add up in the future.