Press Pause on Auto-Renewals: How to Brave a Software Switch
One of the biggest reasons organizations don’t try out a new software vendor is the perceived costs of switching. Most cite the fear of implementation being too expensive, too difficult, or too time-consuming—all excuses to justify maintaining a vendor contract, even if that vendor is performing poorly and not meeting expectations.
But what’s at risk when organizations simply renew year after year? Who loses if the status quo is maintained? The truth is, both the vendor and the company lose.
Consequences of Staying in Bad Vendor Relationship
In a recent survey conducted by Info-Tech Research Group, 93 percent of small businesses, 92.7 percent medium, and 91.9 percent of large companies planned to renew their vendor contract, yet when asked if they would recommend their vendor to others, the average likelihood of referral was less than 25 percent.
This shows that even though organizations are highly unsatisfied with their vendors, they are more likely to keep them anyway. As anyone who’s made a purchase knows, keeping a product without complaint is nearly synonymous with voicing satisfaction. Expressing dissatisfaction or doing the work to analyze how a product is used and the impact it has on your organization is essential to the process of maturing and advancing any domain expertise, including IT service management (ITSM).
Vendors lose because that much-needed feedback is not provided. Without it, they forfeit the opportunity to accommodate their customer’s growing needs and improve their offerings.
Organizations, on the other hand, miss out on opportunities to negotiate for better rates, more support, and deeper discounts. From lower software costs to enhanced security features, switching vendors is the best time to score a better deal for your business.
Vendor Satisfaction Goes Up After Switching
Businesses that shy away from a vendor switch because of perceived costs are stifling their investment and undercutting the value of having a strong vendor partnership. According to an Info-Tech study, medium and large enterprises, in particular, when well-positioned, are shown to be at least 25 percent more satisfied after taking the leap to a new vendor.
With 80 percent of organizations being more satisfied after changing vendors and over half of those organizations being at least 60 percent more satisfied, companies should have good enough reason to make a change.
When renewal time rolls around again, follow these three steps to determine whether switching vendors will result in more value and satisfaction from your IT service management tool.
Step 1: Identify Opportunities to Switch Software Vendors
Before choosing a new vendor, do a deep dive on your current tools and determine which are the poorest performers. Evaluate software features and capabilities and assess their importance, relevance, and effectiveness by ranking them into these categories:
- Nice to have
Be sure to take into account user reviews and feedback from your team to determine which tools warrant being added to the chopping block.
Prioritize Poorly Performing Software in the Top Right Quadrant
Now that you've ranked your current tools, set up a scatter plot with four quadrants on an x- and y-axis. Software at the cross-section of being the least effective and unused should fall at the lowest rank whereas the most effective and mission-critical applications should be at the highest end of the spectrum.
Once you’ve completed your list, reflect on those applications that are least effective yet of importance to your company’s mission. Ask yourself is the software actually ineffectual or has it been underutilized? It’s important to note that switching vendors won’t change the success of the software if organizations don’t commit to implementing and leveraging the software.
It’s also important to not only switch out unessential software but also to retain or add software that’s essential to your organization. Prioritize switching poorly performing software in the top-right quadrant.
Step 2: Decide on Your Terms for Negotiation
With the right negotiating platform, switching vendors can lead to cost savings as well as a higher ROI. When looking to leverage a vendor switch for a discount, be sure to arm yourself with all the data you’ve collected about your current software usage and goals. Pull reports on licenses, the real cost of portals and logins for each employee, and define how you would improve the implementation and utilization of new applications in the future.
Make It Align with Your Mission
If you’re satisfied with the product and believe that with a deeper commitment you can achieve a larger slice of your mission, consider what type of deal will grant you the most value for your time.
According to InfoTech research, the top three reasons companies receive a discount with a vendor are:
- Volume purchase
- Multi-year commitment
- Optimized usage or licenses
Large enterprises, for instance, see an average percentage discount of 31 percent when leveraging large volume purchases. So, sit with your research and determine if there is a way you can leverage your company size, annual contracts, or use more custom applications to score a greater discount.
True Value Depends on What’s Most Important to You
On the other hand, a return on your investment may not always be in the form of discounts. Organizations that come to the table with a solid stance on their needs and goals can realize savings over time in the form of easier implementation, lower support costs, and enhanced security and provider support.
The goal is to make the deal work for you.
Making the switch creates the opportunity to engage with and commit to a new application and service provider. Breaking up with your vendor isn’t easy nor the most pleasant, but being prepared with your bargaining tools is the move that will set you up for the future.
Step 3: Optimize Your Selection Process
Now that you’ve determined your position on leveraging the purchase and which applications are worth the switch, you’ll need to assemble a small team.
Smaller Teams and Time Limits Are Key
When constructing your team, be sure to have representatives from various departments and try to stick to a manageable group of three to five people. A smaller focus group with cross-departmental representation will ensure the process moves along and that the needs of each department are addressed. Having too many people involved in the selection process reduces effectiveness, leading to more time and resources spent on making decisions.
To further manage your time and resources, set a limit on the amount of time spent on selection. On average, most organizations take 8.3 weeks to decide on a piece of software—and spending additional time and effort making the selection does not necessarily improve product satisfaction. In fact, in the end, organizations are notably less satisfied after months of deliberation. So, bring your research to the table, do your vetting, and select the top two or three vendors you like best.
Make the Move to New ITSM Tool
The fear of switching should not hold you back from implementing a system that can help you realize maximum gains and increase satisfaction. Renewal is an opportunity cost. By gathering the data and keeping your pulse on the needs of your organization, you’ll have the clarity and the tools to negotiate a better contract and forge a better relationship with your new vendor.
Take a deep dive into the Info-Tech report for more details on the costs of inertia and the best strategy for switching vendors.