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September 23, 2016
Is your contract with a managed service provider nearing its end? If so, pause for a moment before simply resigning the same old contract. It may not be serving you as well as it could. It may not be what you need any more. You might be able to get a better contract. Here’s how to master the art of renegotiating the IT managed service provider contract.
Begin the Renegotiation Process as Early as Possible
Don’t wait until the last minute to begin renegotiations. This allows you no time to find another vendor if the negotiations fall through or fail to yield what you need. Plus, it gives the cloud service provider plenty of time to get any approvals they need to secure from up top. For example, perhaps you asked for a feature that’s outside their normal offerings, but their sales team is confident they can provide it for you for an extra monthly charge. It might take time to get this approved by top management, and it could take time for their team to establish a suitable pricing structure for what you’ve requested. Time is valuable in the renegotiation process.
Assess How Well the Managed Service Provider Did Over the Course of the Previous Contract
You should have some method in place to evaluate the performance of all your vendors, including your managed service provider. How much downtime did you experience over the course of the current contract? Did you get any credits for the trouble or expense caused by the downtime? Did they meet the requirements established in their SLA? If your provider excelled, you might be willing to pay more for the same services to keep them. Underperforming providers need to either lower their prices or prepare to lose business.
Be Sure to Address Changes in Your Business or IT Needs
What changes have your business undergone during the length of this contract? Does the contract you have in place meet your needs and goals as they stand now? Adding product lines, increasing the number of customers you serve, and changes in the landscape of the marketplace are all factors that can affect what you need from your managed service provider. Negotiate a contract that makes sense for your business as it is now.
Be Sure to Consider Changes in the Marketplace
Even if your business is going strong, changes in the marketplace can affect what you need from a managed service provider and what the going price for said services are. For example, if you were renegotiating a contract a few years ago, mobile technologies would have been important to secure in a new contract. Today, you’ll be looking to add services like data analytics, the Internet of Things IoT, and perhaps even machine learning/artificial intelligence capabilities.
If your managed service provider isn’t getting the job done and isn’t willing to meet you in the middle when it comes to contract renegotiations, be prepared to walk away. Just like when you’re shopping for a new car or a new home, if you aren’t willing to walk away from a deal that isn’t right for you, you’ve already lost the negotiation process. Want to know more about what you should expect from your managed service provider? Download our whitepaper: ‘IT as a Utility’.
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