The situation
A portfolio company backed by a global private equity firm was renewing a $15M IBM agreement covering software licensing and support.
The renewal was routine. No crisis, no deadline pressure, no vendor dispute. The kind of contract that gets signed because the number is in the budget and nobody has a reason to challenge it.
What we found
Deal IQ engaged a subject matter expert with IBM background and compared the proposal against what IBM has agreed on accounts of similar size and shape. IBM prices a renewal on the reasonable assumption that it will be accepted. Sub-capacity licensing, processor value units and bundled entitlements all create distance between the quoted price and the underlying commercial logic.
The result
- Renewal as proposed
- $15.4M
- Final negotiated price
- $11.8M
- Reduction against the renewal
- 23%
- Savings
- $3.6M
A routine renewal, closed in days.
Takeaways
- A proposal that looked reasonable moved 23%
- Nothing changed about what the client bought. Only the price
- No deadline pressure and no vendor dispute
Frequently asked questions
Is it worth negotiating a renewal that looks reasonable?
This one looked reasonable and moved 23%. A proposal that looks about right usually reflects what the vendor expects you to accept, which is rarely the same as what they will accept.
Why do routine renewals go unchallenged?
The complexity of IBM licensing is part of why that assumption usually holds: it is hard to tell from the outside whether a number is fair. It moved 23% without any change to what the client was buying.
Is there a minimum contract size?
No. Deal IQ works on contracts of every size, across all the key IT categories and beyond, wherever there is operating cost to take out. The approach is the same every time: vendor and category specific playbooks, our 32 factor assessment, and an expert network of 350+ people who used to sell for the vendors you buy from. That is what drives our clients to the best possible price, and on a quick timeline.
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