Welcome to 2023 everyone! While the New Year brings opportunities for change and growth, it also serves as a good point to look back on past years to see if we can glean any insights that can serve us well in the future.
Per the title of this post, COVID19 caught most organizations off guard. No surprise there. As such, we’ve seen cloud software customers reach out to their cloud software providers to request some form of invoice alleviation or leniency as a result of changes in their organization (staff, funding, etc.) brought on by the pandemic. When times are tough, every opportunity to more closely manage expenses is considered. In the majority of cases, the unfortunate response was “Sorry, but the invoice is still due on time and in full”. At most, the payment terms could be adjusted to give a bit more breathing room (i.e. Net30 to Net45), but the actual subscription cost wasn’t going to be touched. Given how cloud software companies measure their success and report profitability, this isn't too surprising; their whole model is built on some semblance of assurance regarding predictable Monthly Recurring Revenue (MRR). So how do customers protect themselves now that we’ve lived through the experience of COVID19 and its impacts on operations?
One area of debate is whether or not the "Force Majeure" clause in the cloud software vendors Master Subscription Agreement (MSA) should include pandemics. After-all, one could make the argument that pandemics fall under the category of an “Act of God”. The follow up to this consideration would be to figure out how to structure the Force Majeure provision of your MSA so as to help alleviate the burden on your organization when there is a clear large scale downturn due in no part to your own operations.
It’s a tricky topic no doubt, but one that certainly warrants some thought as you get to the negotiation table with your selected technology partner. We’re all aware of the impacts of COVID19; the hope is that cloud software providers will be a bit more receptive to discussing terms that help their customers mitigate risk and also preserve the relationship should such a clause need to be leveraged again in the future. Remember, it's better to go into these discussions with eyes-wide-open and from a perspective of mutual success with your cloud technology partner. At the end of the day, everyone comes out feeling more confident about the future.
Comments