To Keep Control on Cloud Price Increases
Cyril Bartolo, Corporate Head of Applications, Lagardere Group
Cyril Bartolo, Corporate Head of Applications, Lagardere Group
Reversely with SaaS, where suppliers try to create monopolistic situations, prices may increase significantly.
Best practices to keep control on SaaS cloud price increase are the following, to be included in the contract at the really beginning of your partnership with the cloud provider, at the time where the customer has a strong negotiation power, with the freedom to decide to go for this supplier or not to go (because a customer generally has no more negotiation power later in the partnership, being more or less locked-in):
1) Prefer long contract duration for e.g. 5 years where prices will be frozen
2) Sign in May close to supplier’s financial closing month (typically June) where negotiations are easier
3) Define and freeze ramp-up, true-up, true-down, step-up and step-down prices
4) Try to cap the price increase at contract renewal (if possible for several renewals) or even unlimitedly but legally tough
5) Anticipate agreement renewal a long time in advance
6) Have an operational BATNA (Best Alternative To Non Agreement) meaning you have an alternative to your SaaS service allowing you to say no to your supplier in case of too high price increase or unbalance contractual clause to sign: BATNA can be portability to another cloud or to on-premise
7) Ensure reversibility is easily possible by negotiating it in the contract: enough time for it, enough bandwidth, no or few cost, data can be retrieved in a reusable format. The best is to have a reversibility function you can autonomously activate anytime
8) Consider portability with the numerous tools dedicated to that on the market (Veeam, Veritas, CloudFastPath, Mover, Aspera, Carbonite, Box, Dropbox,…)
9) Contract renewal may be refused by any party without any reason, in that case a prior notification of 3 months is not enough in the SaaS world to move to another software, so the notification should be 1 year in some cases or even more giving time to portability
It would be very relevant to engage cloud suppliers into a code of conduct guaranteeing that price increase at contract renewal will be capped by an inflation index, like in the old world with perpetual licenses and capped increase of the maintenance/support.
