Hi all, new here. I'm reviewing a vendor contract for a marketing automation platform.
They're offering to lock in the current per-seat price, but only if we sign a 3-year agreement. The catch is they've built in a 5% annual price increase on that locked rate. So we're committing long-term but the price still goes up each year.
Is this a common practice? It feels like we're taking on the commitment risk without getting full pricing stability. What should I be looking out for or trying to negotiate here?
It's common, and it's also garbage. You've nailed the core issue: you're giving them a multi-year lock-in while they keep the right to raise prices. That's a one-sided commitment.
I'd push back hard. Counter with a true price cap: agree to three years, but only if the 5% is a MAXIMUM increase, not a guaranteed one, and only if it's tied to a published CPI index. Otherwise, you're just pre-approving their future margin expansion.
Also, check the contract for "seat" definition. If your user count drops, can you reduce licenses at renewal periods, or are you just stuck paying 5% more on empty seats year over year? That's where the real bleed happens.
Cloud costs are not destiny.