Most cloud technology providers include a clause in their contract that calls for CPI (Consumer Price Index) or X% price increase/uplift at the time of renewal (in some cases, these price increases are uncapped!). Typically this increase is justified based on inflationary impacts, which can be argued one way or another (i.e. natural inflation due to economic conditions vs. how efficiently technology can be delivered; an example is the reduced cost of data storage over the past couple of decades). The other reason for these uplift costs is due to increasing innovation. The premise is that through the course of your subscription, the cloud technology provider is continuing to make investments in the solution that will yield a benefit to you. These innovations need to be developed and supported, so the increase across the customer base helps to fund the associated efforts. This makes sense. You get what you pay for. The expectation we put on cloud providers is that they will not only stay innovative/forward thinking, but that those innovations will yield some tangible benefit to us as loyal, multi-year customers.
But, what if all those upgrades don’t provide much value to you? Now I’d argue that in most cases they do/should (whether readily visible to the customer or not). However, given the theme of most of these posts regarding value-based partnerships and agreement; it’s worth raising what the value of those innovations are to YOUR organization and how they can be measured. If a new set of features is released that doesn’t contribute (even modestly) to your return on investment (ROI), should you really expect to pay the same increase as someone else who gets more benefit from said feature(s)? Perhaps not. The key here, like with most things in the cloud technology world, is to find a way to agree on key performance indicators (KPI's) with the vendor, and then make sure that there are ways to measure and manage use of their solution in line with the KPI’s you’ve agreed to (this includes those upgrades). I’d contend that a customer would be willing to pay a higher uplift/innovation charge if the features rolled out DIRECTLY contributed to the value they sought to garner. Why? Because not only would these be easily calculable, but the cloud technology partner would be viewed as more tangibly helping the customer unlock or achieve additional value, and in most cases, faster. Like most things, these contractual uplifts should be discussed openly/honestly. It may be difficult to do this for the first year when you're just getting settled into the relationship, but come renewal time, it should be a part of the discussion, particularly in situations where the solution is integral to your day to day operations.
Comments