Case Study
Playing Hardball: Competing a Software Contract Renewal to Save Millions
When a federal agency faced a 90 percent increase in software costs, Censeo's market analysis and vendor management capabilities reduced contract costs by 60 percent.
Situation
A federal agency found itself in a difficult situation when its software provider threatened to raise prices by 90 percent upon contract renewal. While the original agreement had successfully reduced costs for the agency, these savings were threatened to be eliminated with the unanticipated price increase. As a result, Censeo was brought in to help negotiate a more favorable contract.
Approach
Censeo brought analytic capabilities, stakeholder communication management, and negotiation strategies to support the client in finalizing the contract. The initial steps entailed refreshing the existing spend baseline and forecasting future demand to calculate exactly how much the agency was spending. The team also worked closely with technical representatives to identify what capabilities would be required. While these steps were important in preparing for negotiations with the software provider, it was the in-depth market analysis that truly created opportunities for the client. The market for this software was dominated by one large provider, and through the market analysis, Censeo identified alternative opportunities for software procurement.
Simultaneously, Censeo worked with the client to inform senior stakeholders of the potential cost impact of renewing their current contract versus using an alternative, more affordable provider. After generating buy-in with the end user community and senior stakeholders to use an alternative provider, Censeo worked with the client to issue a Request for Information (RFI). This indicated to the private sector the client’s plans to solicit the required technology from any provider, including not only the traditional manufacturer but industry-leading alternatives as well.
Results
Through optimized negotiations, Censeo reduced the price of the software by 60 percent. By ensuring best practices in vendor requirements management, effective negotiations, and the introduction of an alternative provider, the agency avoided a dramatic price increase while maintaining required capabilities. Not only has this solution prevented increased software costs in the current term, but it has also protected against future price increases by having a network of alternative providers that must compete to provide the best pricing, product innovation, and quality.
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