How have you been using your vendor partnerships to navigate economic pressures? Are you renegotiating contracts, consolidating vendors, or exploring new pricing models?

It is my understanding (via Gartner of course) that most vendors are adopting the "monday.com approach to licensing" - which is placing an emphasis on getting everyone to yearly contracts - avoiding long term contracts which allows the vendor to ratchet up the rates at regular yearly intervals.  Where possible, lock-in long-term deals and include a limit on the uplift on renewal.

As an MSP this has been quite common initiatives/strategies we've received from our clients in regards to their contingent workers, especially IT-skills. I can share how we together with a few of our clients has approached this:

Renegotation of active contracts:
1. Map the contingent workers in terms of contract length, rate and critial skill (1-5)
2. Define from the list which workers who should be excluded, if any, and why
3. Have a clear communication of why this is being done. During the pandemic and once the Russian invasion of Ukraine started, it put a lot of pressure on all. Communication and aligment between the MSP and client needs to be clear, and the MSP should have the clients mandate to run the initative
4. Set up a decision-tree of what will happen during the different replies from the workers
5. Get going, and have a deadline for when it should be done

Vendor consolidaiton:
1. Identify your strategic vendors and the "rest"
2. Together with the master vendor/prime vendor/MSP build a communication plan towards the "rest" of why this is done
3.  The master vendor/prime vendor adds the "rest" under its contracts, and acts as the tail spend supplier, for all non strategic vendors where T&C are harmonized etc
4. To simplify it, the tail spend suppliers understand that this is the way of working to keep the contract

When it comes to contingent workers, exploring new pricing models, would be for instance to move more of the work into a Statement of Work (SOW), which is a bit different than hiring a worker as time&material. This requires a bit more, when it comes to scoping the SOW, the maturity of the hiring manager since they are no longer responsible for the outcome. Really simplified. 

If the questions was to address contingent workers as well, I hope this helps you.  

We did renogotiate contracts with our top vendors. As we consider them partners, we want to ensure they all contribute to mitigating economic pressures. We also made sure to understand the cost structure of the major contracts and worked on changing our approach in some cases. An example of that would be redesigning a portion of our transactional systems so it doesn't ping the mainframe too often while still providing the same functionality, since our mainframe contract is structured on the number of mainframe calls.

When navigating economic pressures, it's essential to leverage your vendor partnerships strategically. Start by reviewing existing contract language and mechanisms, as these are already in place and can provide a solid foundation for negotiations. Look ahead to upcoming purchases that may be impacted by tariffs and consider moving them up ahead of any announced tariffs to protect pricing. Engage in open discussions with leadership about pricing sensitivity, ensuring they understand the risks of delayed decisions and potential cost impacts. Approach these conversations constructively, focusing on budget and prioritization rather than using them as a tool to pressure for immediate decisions. This way, you can foster a collaborative environment that prepares your organization for unexpected challenges.

With some vendors contracts can contain clauses that limit the amount of pricing increase at renewal or annually.  This helps a bit.  Yes, customers have the most leverage to get such language at the time of the initial purchase or increasing spend in the same or other areas with a vendor.  Otherwise probably not possible at all.

Mike