ICT contracts must be renewed on time to prevent serious interruptions, monetary losses, and security flaws. If contracts are not renewed on time, end-user services such as hardware maintenance, software subscriptions, and EoX (End-of-Service, End-of-Life, End-of-Support, etc.) are most at risk.
What is a Contract Renewal?
Contract renewal is when businesses extend a contract with each other after it expires. The renewal management process can either be done passively, actively, or through an automated system. Ensuring contracts are renewed on time significantly contributes to a VAR business’s welfare. In this post, StrataVAR outlines potential risks for ICT resellers when contract renewal is overlooked.
Missing a Contract Renewal: The Risks Involved
When renewal management is ignored, the risks are substantial. Lack of timely renewals can lead to financial losses and even threaten business continuity. Contract disruptions can cause considerable operational downtime with no guaranteed service and create security risks due to missed updates. When large volumes of assets are involved, such as software subscription renewals for thousands of users, the risk is further amplified. It’s akin to the realization of needing car insurance only after an accident; without an active contract, day-to-day operations are left vulnerable because there is no guarantee that problems will be fixed or that replacement parts will be available.
Financially, delayed renewals may incur penalties or higher costs, and using outdated or unsupported software/hardware can increase security risks. Plus, operating under expired service agreements can lead to legal and compliance issues, thereby exposing the entire organization to greater risk.
Four Reasons Why ICT VARs Must Prioritize Renewal Management
Despite their clear importance, contract renewal management is a daunting task for any ICT Value-Added Reseller (VAR). The VAR is responsible for ensuring that their customers’ contracts are renewed on time and updating them on any upcoming End-of-Life (EoX) or End-of-Service milestones. VARs must also maintain an up-to-date list of tens of thousands of items that need renewal and manage the assets for each customer, which is especially tedious and error-prone when done manually using Excel or similar tools.
The implications can be severe for ICT VARS who fail to stay on top of the contract renewal process. These include:
Revenue Impact
Neglecting renewal contracts can lead to direct financial losses. For example, if a VAR fails to renew a large enterprise customer’s software licenses on time, that customer might switch to a competitor. This results in the VAR losing not just the margins from the renewal revenue but potentially the entire contract. Additionally, competitive displacement can occur when a competitor audits a VAR’s customer’s assets and discovers missed renewals. This makes it easy for the competitor to poach the business, presenting themselves as more reliable and attentive. Over time, neglecting renewals for several customers, especially those with substantial contracts, can lead to a significant decline in overall revenue, affecting the VAR’s financial stability.
Customer Relationship Management
Customer satisfaction is crucial for long-term success for any ICT VAR. Missing renewals can severely damage customer relationships. Consider a scenario where an end-user experiences a significant security breach because their software renewal was missed. This would result in high customer dissatisfaction, likely prompting the customer to move to another VAR that promises better renewal management. Additionally, failing to renew a customer’s critical infrastructure support contract could lead to prolonged downtime during a failure. This results in poor satisfaction and a negative customer experience, damaging the relationship and making future renewals and upsells difficult.
Brand Reputation and Market Position
One of the benefits of contract lifecycle management is that it can enhance a VAR’s reputation and market position. By ensuring timely renewals, a VAR can position itself as a reliable partner. For example, a VAR that consistently updates a customer’s hardware and software before reaching the end of service is seen as proactive and dependable. This ongoing communication helps the VAR understand and meet the customer’s evolving needs, solidifying its position as a key business partner. Conversely, if a VAR repeatedly fails to manage renewals properly, such as missing multiple support contract renewals leading to frequent downtimes, it can damage its reputation. Customers and prospects might view the VAR as unreliable, leading to a loss of market share.
Strategic Opportunities Missed
Inefficient ICT contract management can result in missed opportunities. For example, a VAR that doesn’t renew a software subscription on a specific appliance might miss the opportunity to sell additional or more advanced services. On the other hand, efficient renewal practices can lead to new business opportunities. By managing renewals effectively, a VAR could identify a customer’s need for an upgrade, opening up a new revenue stream and strengthening the business relationship.
Contract Renewal Starts with Automation
Staying on top of renewals is crucial for ICT VARs to maintain revenue streams, customer satisfaction, and a strong market position. The task is challenging, especially when managing multiple or large accounts, but it is essential for long-term success. Implementing an automated ICT renewal platform such as the PrW (Partner Renewal Workstation), could provide a practical solution to streamline the process, ensure timely renewals, and capitalize on strategic opportunities. Ultimately enhancing the VAR’s ability to serve its customers effectively, have full ownership of the account and shut out competitors. To learn more about effective renewal and quoting solutions for ICT VARs, contact StrataVAR.
