Software licenses constitute a major portion (~35%-45%) of the overall Information Technology (IT) spend of an enterprise, typically with a large and unwieldy software portfolio which needs to be managed. And as the software licensing market is evolving fast, most of the software vendors are now making considerable changes in their software features, pricing, pricing models and service agreements.
These changes raise questions in the minds of enterprise stakeholders as they prepare for the renewal discussions with the software vendor, with the majority of these questions based around:
- Alignment of the quote with industry pricing benchmarks
- New pricing models proposed
- Licensing tiers and packages
- Inclusion of new features in the proposal and the Return on Investment (ROI) on these features
- Software as a Service (SaaS) vs on-prem model
- Alternate products available in the market
- Customer support coverage and Service Level Agreements (SLAs)
These are not minor considerations – they directly impact financial outcomes, operational flexibility, and the organization’s ability to scale and innovate.
Reach out to discuss this topic in depth.
The risk of rushed renewals
At Everest Group, we’ve seen firsthand how enterprises – even the most mature IT organizations – can find themselves stuck in unfavorable software agreements simply because the renewal process wasn’t given the attention it deserves or requires.
As software portfolios grow in scale and complexity, the renewal cycle often becomes a rushed, reactive process driven by looming deadlines and vendor pressure.
Meanwhile, procurement teams often lack detailed usage data, competitive benchmarks, or negotiation playbooks to push back effectively. The result? Organizations unknowingly commit to multi-year contracts with inflated costs, underutilized entitlements, or unfavorable clauses that limit flexibility down the line.
Renewals as strategic opportunity
Instead of seeing this as a challenge, enterprises should see this an opportunity to reassess vendor value, optimize spend, and align software investments with business goals.
A structured renewal strategy should involve:
- Advanced planning: Start the renewal evaluation process well in advance to allow for meaningful review and negotiation
- Utilization assessment: Analyze actual license utilization and compare it with entitlements to identify inefficiencies or over-provisioning
- Competitive benchmarking: Use real-time market insights to assess whether the proposed pricing and packaging are in line with peer organizations
- Cross-functional collaboration: Engage business users, IT, procurement, and finance to evaluate the software’s impact and relevance
- Proactive vendor engagement: Don’t wait for the last minute – reach out early with a clear view of your requirements and priorities
While these are some of the key considerations, it’s important to recognize that every software renewal comes with its own set of nuances – shaped by the vendor’s evolving strategy, internal usage patterns, and the enterprise’s broader business goals. There’s no one-size-fits-all approach, which is why renewals shouldn’t be treated as a routine administrative task, but as a strategic exercise which helps enterprises to stay agile, efficient and competitive.
Join our upcoming LinkedIn Live event (Molly to provide link to event to hyper-link) in which we will deep dive into the key challenges observed in software license renewals and share proven negotiation strategies to ensure that renewals are well aligned with market standards. Whether you’re preparing for a major renewal or looking to strengthen your negotiation posture, this session will provide valuable guidance on how to make software renewals work for you — not against you.
If you found this blog interesting, check out https://www.everestgrp.com/everest-groups-5s-framework-choosing-the-right-software-licensing-strategy-blog.html which delves deeper into another topic regarding pricing and renewal management.
If you have any questions, would like to gain expertise in pricing and renewal management, or would like to reach out to discuss these topics in more depth, please contact Rahul Gehani ([email protected]) and Duttatreya Jena ([email protected]).
