Jeff Vail
Jeff Vail

When Is the Right Time for Contract Renewals?

Finding your company’s ideal renewal window


Contract renewals have a way of sneaking up on companies, catching them unprepared and without enough time to catch up. The pace of technology change is rapid. IT leaders need to use this as a chance for transformation. There is never as much time to properly prepare as you think, and taking the time to build and execute a well thought out renewal strategy is critical to achieving business objectives.

In this post we’ll discuss some strategies for planning contract renegotiations and rebid cycles and why it’s so important to have enough time for them.

Companies underestimate the time they’ll need

At WGroup, we’ve found the ideal window for starting to address contract renewal is 18 months. This leaves enough headroom for the work that needs to be done to successfully negotiate and implement new contracts while accounting for potential delays along the way. If you’re like most IT leaders, that’s much more time than you give yourself to prepare and execute a deal. But what goes into these 18 months, and why is it so important to have that much space to work in?

Strategy/Analysis Work (3 months) – One of the most important steps in contract renewals is forming a plan of attack to effectively address transformational technologies, changes to the service delivery model, and new business objectives. It is critical to have a clear understanding of what works and what doesn’t in the current agreement, what requires change, and what will drive business goals. Aligning the solution and SLA with business needs means carefully evaluating current performance and identifying areas that need improvement.

RFP Lifecycle (5-8 months) – This is probably the most variable period for contract renewals. Companies must allot a significant amount of time to see new solutions for vendors bid preparation and submission, bid evaluation, and negotiations. It is important to go slowly, and carefully evaluate every option. Make sure to evaluate how the new agreement and new solution will enable business agility, flexibility and speed.

Transition (6 months) – If your company decides to change vendors, or if the current vendor’s solution is dramatically altered, the IT organization needs to allot time to implement any changes. This may include periods for physical hardware and infrastructure changes, applications and tools replacements, training, and other preparations that the vendor must make. Allotting enough time for this period ensures that the process isn’t rushed and that an underdeveloped solution isn’t implemented.

Contingency Time – Never expect the best case scenario. Allocating extra time for course correction is vital. You may see something exciting that you had not thought of or considered that you want to take advantage of. The more time you have you not only get more leverage to get best deal but you also have more room to make sure you get right solution.

Above all, it is important to remember that this process cannot involve only the IT organization. Business leaders needs to be engaged in this cycle. IT must first ask the business what the desired outcomes are and how can these outcomes be reached. Adapting the contract renewal process to address business goals while allotting enough time to effectively meet those goals is at the heart of an effective contract renewal strategy. Don’t get caught without enough time and without a plan. Prepare for contract renewals early and use the extra time to make sure vendors meet your business’s real needs.

To learn more about Wavestone US’ services, visit https://www.wavestone.us/capabilities/

Jeff Vail
Chief Executive Officer

As CEO, Jeff leads Wavestone US’ team of experienced consultants and plays a pivotal role in strategy development and execution for the firm. He is a top advisor and thought leader on Wavestone's range of services, spanning IT strategy, run optimization, and IT service management. With more than 20 years of experience in executive leadership functions, he has a deep understanding of what is takes to solve IT’s biggest problems: aligning with the business, lowering costs, and increasing speed and impact.

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