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How to Negotiate Software Contracts During Mass Corporate Layoffs

If your business is one of the thousands going through tough times during this pandemic, you find yourself budgeting just to keep the lights on and sadly, that means you may be forced to lay off or put on furlough your hardworking employees unless you can come up with some innovative cost saving ideas.  

What makes it worse is that there’s no way to predict what will happen. If you’re planning on rehiring staff, you might be stuck keeping your pricey infrastructure in place even though there’s no one to take advantage of it. 

At MetrixData 360, we recognize that these are hard times so we want to share with you how you can temporarily scale your software estate back without permanently losing your assets.

The ‘Shelfware’ Trap

What is annoying about momentary slumps in business is that they are just that – momentary.

Business will pick up again at some point. Which means that there is hesitation to retire or downsize on any asset because tomorrow your workers will be back on staff and you will need everything in place again.

However, when it comes to your software licenses, it is important to remember that you don’t actually own anything, you’re only paying for the use of that software. If the employees affected by layoffs and hour reductions aren’t using it, why are you paying for it? You’re essentially just giving the software vendors free money if you are doing that.

Many companies do not have a strategy for retiring assets, commonly called ‘shelfware’, where the asset is put into storage and never used again but you are still left paying for it.

In these trying times, unnecessary spend is the last thing you need. Buying products is the easy part, maintaining them and making sure that you maximize their value is more difficult.

Plan A: Read Your Contract for Chances to Decrease Your Software Spend

In current contracts, there are no standard provisions for a long period of downtime. The only clause of that nature would be downsizing due to divestiture. However, the beauty of software contracts is that they can be hand-tailored to the client, so there may be something in your specific contract which could allow you to temporarily downsize.

If you have a license that is committed annually, then depending on your renewal date, you may be allowed to push the renewal date sooner to allow you to talk about negotiating your contract with the vendor.

If you have a subscription, it is important that you decrease your count as quickly as possible and there may be clauses in your contract which allows you to do that.

The longer those counts are in your software environment, the longer they will be costing you money. Most contracts will not let you just decrease your count for your licenses without forcing you to jump through hoops and there’s the tricky part.

You see increasing your licenses with the software vendors is easy, they encourage it and it is almost expected of you within the partnership that you have established with the vendor. It’s decreasing your count that is the issue, your contract may not allow it, but everything is negotiable.

Plan B: Negotiate a Decrease with Your Software Vendor

If you’ve read through your contract and found nothing that could possibly let you lower your counts for the time being, then it’s on to the next step. You’ll need to get in touch with your software vendor and set up a negotiation as soon as possible.

This will be a hard thing to negotiate because during this economic downturn, the software vendors are also taking a hit, so they will probably take an aggressive approach to their sales. A decrease in licenses may be the last thing they will want to hear right now. Here are some tips for dealing with this difficult negotiation.

  • Emphasize the value of your long-term partnership over immediate gains. Bring up how long you have been or how long you are planning to be a loyal customer.
  • Escalate the issue to the higher ups in the software vendor’s company, if you have the connections.

If you’d like some tips on how to face a tough contract negotiation, you can check out our article, 5 Simple Tips for Software Contract Negotiation.

Plan C: Suggest Alternatives

Alright, so you looked through your contract and you can’t reduce anything, and you talked to your software vendor and they might as well have stuck their fingers in their ears and hummed loudly for all you got through to them.

If you can’t decrease your count, you can try a few of these alternatives with the software vendor to see if anything sticks:

Swap your On-Prem Licenses for the Cloud

<p”>In recent weeks, some companies have completely laid off their workers while other companies have just sent them home.

Applications like Microsoft’s Teams and Zoom have seen a skyrocket of activity and you may find that while you’re struggling to find something to do with your on-prem licenses, at the same time your Cloud platform is stretched to full capacity.

Therefore, you might get some traction with your software vendor if you offer to temporarily swap your on-prem licenses with any alternative Cloud subscriptions the vendor might have.

Microsoft, for instance, is particularly aggressive with pushing its Cloud platform onto its customers, so such an offer might spark their interest.

Push Your Spend Back

If you have a large deal in place with your software vendor over a long period of time, you may ask to just push the spend for this period back into next year. This will give your business the time it needs to recover and will offer the chance to improve immediate cash flow.

Trim Back Any Decoration

In more economically prosperous times, certain applications found in a bundled package may have just been nice add-ons or may have contributed to a better discount at the time. Now is the time to take a hard look at those applications and see if they are really worth the effort and the money to upkeep.

For a more in-depth look on where you can cut savings during times of crisis, you can check out our article, How Will Your Software Contracts Be Affected By COVID-19?

Plan With MetrixData 360

During hard times, it’s more important than ever to be smart with your software. Harnessing these saving opportunities could mean avoiding wasting critical resources on software no one is currently using. 

At MetrixData 360, we know how to cut your software costs down so that you only pay for what you are using and what you need. We have sat through hundreds of contract negotiations and we know how to manage your software to get you the results you need.

If you would like more information, you can contact us for a free consultation.

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