Optimizing Contract Duration

I'm wrapping up another quarter negotiating SaaS deals, and for one deal, I was debating what term length to pursue. (Contract term length has become one of our most critical strategic decisions in procurement.) 🔹 The Current Landscape 🔹 The market has shifted dramatically. SaaS contract lengths plummeted in 2023 and have only slightly rebounded in 2024 (still averaging under 15 months). Meanwhile, price uplifts have soared to unprecedented levels. 3-15% is now standard, with some vendors pushing shocking increases (just heard from a fellow procurement leader facing a 200% increase on a multi-million dollar spend... ouch). 🔹 The Pendulum Swing 🔹 I'm seeing two distinct approaches emerge: Some companies have instituted strict policies capping contracts at 12 months (too many got burned in 2022 with oversized multi-year commitments). Others still pursue 3+ year terms to maximize discounts and shield themselves from those aggressive annual uplifts. 🔹 My Portfolio Breakdown 🔹 Looking at deals I've personally negotiated over the past few months: 1-year terms: 56% 2-year terms: 31% 3-year terms: 7% < 1-year terms: 6% > 3-year terms: 0% Surprisingly, 2-year deals weren't higher. For me, they often hit a sweet spot: enough leverage for better pricing, reasonable commitment timeframe, and price protection for 24 months without being locked in forever. 🔹 My Decision Framework 🔹 While every situation demands nuance, here's my general approach: 1-Year Terms When: 🔸 New vendor (even thorough due diligence has blind spots) 🔸Highly competitive market (optionality is a beautiful thing) 🔸Rapidly evolving space (avoid lock-in with outdated tech) 🔸Low switching costs (maybe we go in another direction). 🔸Current vendor with performance issues or pricing concerns (goal here is to start shopping alternatives) 2-Year Terms When: 🔸Stable, predictable growth projections for seats/usage 🔸Balanced need for pricing leverage vs. flexibility 🔸Vendor relationship is solid but not critical infrastructure 3-Year Terms When: 🔸Core enterprise systems (sticky, difficult to replace) 🔸Vendors with consistent, aggressive YoY increases that are hard to push back on (although sometimes we pivot to a 1 year deal to switch to someone else). 🔸 We've validated long-term fit and negotiated favorable terms (partnership). I know everyone loves a three year term but if it's pushed to hard (by either procurement or sales), it can hurt trust. The dataset isn't massive but interesting not the less. Anything surprise you here?

3 Month vs. 6 or12 Month Contracts: What's the Right Choice? When hiring contractors, businesses often debate whether short term (3 month) contracts or longer term (6/12 month) commitments make the most sense. But which is the better approach for a long term project? 🤔 The Case for 3 Month Contracts: 🚀 Speed & Flexibility: Ideal for quick-impact projects or immediate skill gaps. 🎢 Risk Management: Lower commitment if the hire doesn’t fit. 💸 Budget Control: Easier to manage short-term expenses. 📉 Downside: Risk of losing talent just as they hit their stride. Constant hiring cycles can drain time and resources. The Case for 6 or 12 Month Contracts: 💻 Knowledge Retention: Contractors gain deeper business context, reducing ramp-up time. 📈 Continuity & Stability: Critical for long-term projects requiring consistency. 💰 Cost Efficiency: Lower recruitment overhead and smoother transitions. 📉 Downside? – Less flexibility if project priorities shift. A poor fit could be costly. 🚀 So, what’s the best strategy? Over the past 11 years I've work with customers - almost every single time, a longer term contract is usually the best strategy.. and here's why.. 🔥 Pretty much every contract agreement as a notice period, offering a 'safety net' if the project grinds to an unexpected halt.. 🔥 Contractors are a business, who need to ensure they have pipeline work.. if you offer them a 3 month assignment, they will most likely be lining up their next project after 6 weeks of joining.. 🔥 There maybe some room for negotiation.. if your budget is tight, a contractor is likely to be more flexible on their rate if you can offer more work / longer engagement. Both parties benefit 🤝 Feel free to connect if you need more advice around your contracting hiring strategy 👍

Most “3-month contracts”… aren’t really 3 months 🤔 But that doesn’t mean they’re wrong. I’m seeing a lot of “initial 3-month” contracts at the moment - and they tend to fall into two very different buckets: The good kind 👇 • Clear problem to solve in that timeframe • Early discovery / planning phase • Outcome-led (“we need X defined / delivered in 12 weeks”) • Acknowledgement the role may evolve or extend These work really well. Good contractors like these - low risk, high impact, clear runway 🚀 And then there’s the other kind 👇 • “Come in and help” • No real scope or ownership • Quiet hope it turns into something longer • Basically backfilling a gap This is where it falls down. Because the best contractors aren’t judging the length… they’re judging the clarity. A strong 3-month contract says: 👉 here’s the problem 👉 here’s what good looks like 👉 here’s how you’ll land it A weak one says: 👉 we’ll figure it out when you get here And funnily enough, both often end up running for 6–12 months anyway. The difference? One attracts people who deliver quickly and the other attracts people who need direction (or worse… the good ones just don’t engage at all) If you’re going out with a 3-month contract right now, it’s less about the duration… and more about how clearly you can define the first 90 days. That’s what people are buying into!

How long should a contract be? It's an age old question in public procurement, but often, there can be a reluctance to go beyond a term of 3, 5, or even 7 years for fear of being accused of being anti-competition. In reality, the contract duration should always reflect the complexity and scale of investment, and should never be time bound by any arbitrary number of years. If the investment has an expected usable life of 10 years, then the contract should have provisions for lasting a similar period. If you are 5 years in, and with 5 to go, the last place you want to be is deciding on whether to retender (which is risky), relying on a contract modification under Art. 72, or going the tough route of a direct award under Art. 32. Recital 62 of 2014/24/EU states that, 'In particular, it should be allowed to set the length of individual contracts based on a framework agreement taking account of factors such as the time needed for their performance, where maintenance of equipment with an expected useful life of more than four years is included or where extensive training of staff to perform the contract is needed'. The rules are clear, but they really do require the contract notice to be similarly clear, and to have adequate 'future-proofing' included when it comes to the actual duration. I'd rather have 5 extension options to utilise from Day 1, than go scrambling for justifications mid-way through. If you are making a medium to long term investment, it makes sense to make a similar investment in the quality of your contract notice.