What to know before signing a three-year SaaS contract
A three-year SaaS contract is on the desk with a discount for committing. Before signing, this is what I would want to know.
What does the discount actually buy? Compare the three-year total against one year at list plus two renewals at the vendor's typical increase. Ask for that number in writing. Discounts are often smaller than they look once the annual uplift clause is applied.
What happens to the price if we shrink? Seat counts go down as well as up. Many contracts only allow up.
What are we locked into if the product changes? Vendors get acquired, reprice tiers, retire features. A three-year term without a clause for material changes is a bet that nothing happens to the vendor for three years.
How do we leave? Data export format, timeline, cost, and whether termination assistance exists. If leaving would take a project, three years is not the commitment. Forever is.
Who else our size has used it for three years, and can I call them.
What is the cheapest way to find out we were wrong? A one-year term at a slightly higher price is insurance. Price it against the discount and decide whether the insurance is worth it. Often it is.
The vendor wants the three years because it moves the risk of you leaving from their side of the table to yours. That is a fair thing to want. It is also a fair thing to be paid for, and the discount on offer is rarely the going rate.