What to do in the months before Software Renewal: Questions to ask

As the year comes to a close, Asset Managers must add managing and negotiating Market Data software licensing renewals to their many other end-of-year priorities. Software vendors are already hard at work developing a seller’s playbook. Who is working on your buyer’s playbook

Here are questions to ask in the context of 5 tips that seasoned Market Data procurement experts use to get the best deals:

1.    Plan your year  

Kicking off renewal starts early on. Check your contract for the notice period and start as much as 90 days in advance of that. Calendarize your decision dates to renew or not and determine whether you need to give notice of cancellation. Check on auto-renewal deadlines so you don’t end up stuck with one.

2.    Take Inventory

A lot of vendors provide similar services, so it’s important to look at services that overlap and confirm you have the best product considering usage and budget. ­­­­­­Is your software doing its job for you? We recommend requesting current user seats and usage statistics. Once they’ve been gathered, it’s time to analyze them. Determine whether this product’s utilization is substantiated by partners or rainmakers. Who is benefitting from this product, how, why, and is it worth the price? Check out the market to ensure you have up to the minute awareness of the competitive landscape, and the best of what’s available.

Establish scope and leverage product utilization and market competition to negotiate renewal pricing as low as possible. The next step is team, legal, and management approval. Lastly, be sure to keep records of spend, with auto renewal terms, term dates, and licensing details properly tracked. Ideally, your firm should have a single source of truth for all software licenses, with the capacity for CFO-ready reporting on Market Data spend by employee, office location, department, level, and supplier.

3.    Negotiations

It’s good to know when it’s important for vendors to get their contracts. Starting early will give your team more time to run numbers and usage, understand proposals, tactfully negotiate, and secure the best deal. If you know each vendor well, you may be able to identify opportunities to help each other by renewing early, or in the middle of the quarter, or when the vendor has an unexpected gap.

Knowing your numbers is important – data is leverage. Proposals can be tricky, and often contain new product names, commercials, etc. and may be sent by new account representatives. Take the time to compare the new proposal to the previous one, and any comps from your own portfolio or from your peers.

4.    Know the Key Commercial-related items

Now that you have your price, do you understand the key commercial terms?

  • Auto Renewal Clauses
    It is safest to remove all auto renewal clauses altogether to avoid a subscription potentially renewing without proper analysis and confirmation. If the vendor refuses to remove the auto renewal clause, work to minimize the auto renewal term, and extend the advanced notification date.
  • Redistribution rights
    Sometimes vendor language regarding use and distribution of their content is highly stringent. There should be flexibility to include limited exports within internal and external materials.
  • Data deletion upon termination
    If the vendor is firm on this, make sure an exception is included for regulatory purposes.
  • Changes to fees
    Make sure to check for and exclude any terms giving the vendor a right to increase fees mid-term.  
  • Licensing restrictions
    Ensure proper group, location, user limit, and entity are recorded– aligning with user’s requirements and negotiations.
  • Cost and billing frequency
    Ensure the determined price matches the final negotiation outcome. Also, make sure billing frequency aligns with firm policies and budgets.  

5.     Avoid common pitfalls

  • Time can be your friend or enemy
    Be thoughtful but don’t take too much time. Know your own flexibility and timeline. Vendors have incentives too, commit to mutually beneficial decisions and respect the vendor’s timeframe.
  • Do your homework
    80% of the deal is homework, 20% is the execution
  • Data deletion upon termination
    If the vendor is firm on this, make sure an exception is included for regulatory purposes.
  • Don't be shortsighted
    If you’re going to downgrade or cut seats, ensure that your company won’t be expanding soon. Don’t be shortsighted just to cut short term costs. And if you are upgrading or changing software, be very aware of how it will impact the teams’ operations.
  • Maintain a peer network
    Keep up with your peers. It is important to maintain a breadth of industry knowledge, capability for benchmarking, and awareness of up-and-coming vendors.

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