Dive Brief:
- IT leaders are more likely than ever to switch vendors at renewal as costs rise and technology evolves faster, according to a new study published by tech services distributor Telarus.
- The survey of 503 midmarket and enterprise purchasers conducted for Telarus’ 2026-27 Tech Trends Report found that 84% are open to changing vendors at renewal. The technology services distributor commissioned research firm Redpoint Insights to conduct the survey.
- Over the last year, 87% of buyers saw renewal costs rise, and one-third regretted a major technology purchase. “They've had hard experiences in renewal, and they know that technology is moving at the speed of light,” Telarus Chief Marketing and Experience Officer Jen Dimas told Channel Dive at the Telarus Partner Summit last month.
Dive Insight:
Vendors are putting a premium on new customer acquisition and making renewals more expensive. That’s especially true in SaaS, where vendors face pressure from investors to maintain profit margins north of 40%.
“Basically, your existing customers are just gluttons for punishment,” said Constellation Research Founder and Principal Analyst Ray Wang, who helped build the report. “The new customers are getting the discounts, and [the vendors] have got to continue to show numbers and show that growth.”
Nutanix’s aggressive campaign to win VMware by Broadcom customers is an extreme example, Wang said. As Broadcom forces existing clients to lock into expensive long-term contracts or find an alternative, rival vendors must move fast.
“It's just go-land-win these accounts, because if you don't, it's going to be a seven-year dry spell for you,” Wang said.
In the unified communications and customer experience software market, vendors are factoring seat churn into renewals.
Eclipse Director of Advisory Linzee Safron said suppliers are pressuring their sellers to keep customer accounts flat to growing. When a customer attempts to reduce the number of licenses at renewal, vendors add extra SKUs to the proposal to keep the total spend even. The SKUs are typically for AI tools that complement the overall platform.
Safron has observed this upsell strategy on four separate occasions in the last 12 months.
“The customer says, ‘Hi, I'm ready to renew. I'd like to see what a 12-, 24-, and 36-month renewal offer looks like for us, but we need to drop our quantities 10%,’” Safron told Channel Dive. “The providers are coming back and saying, ‘Well, you dropped your quantity, so either your standard rates are going to go up because you don't have the volume discount anymore. Or here's an alternative proposal that has 10% less quantity here, but now also going to get virtual agent capability or an AI agent.’”
In the telecom service provider arena, Safron said fiber prices are rising as they did between 2014 and 2017, similarly spurred by intensive network buildouts. But this time around, vendors aren’t budging on renewals.
“You could typically get your account managers to reduce the costs or present competitive pricing for another carrier to reduce the cost and be able to save and grow that business in other ways,” Safron said.
