Companies across multiple industries are now treating renewals as strategic decisions rather than routine administrative housekeeping — and that shift is lengthening negotiation cycles, concentrating risk in sectors exposed to commodity prices and trade policy while leaving banks and many enterprise-tech buyers relatively freer to spend on strategic digital priorities.
The short version: procurement calendars have stretched. Where once an annual or multi‑year contract renewal could be completed in a matter of weeks, many customers are taking months — sometimes three to five months longer — to decide whether to renew, restructure, or replace major IT contracts. That delay is not evenly distributed across the economy. Firms in manufacturing, oil & gas and retail are most likely to slow or postpone renewals because their revenues and capital plans remain tightly coupled to global commodity cycles, tariffs and consumer demand. By contrast, banking and enterprise tech buyers are actively funding digital modernization and AI initiatives and therefore still have headroom for discretionary IT spend.
This dynamic matters for two audiences. For IT vendors — SaaS providers, systems integrators and cloud operators — stretched renewals increase revenue timing risk and raise the cost of sales. For CIOs and procurement teams, it creates an opening to reset pricing, architecture and vendor relationships in a way that improves resilience and lowers total cost of ownership (TCO).
That divergence creates both risk and opportunity. Vendors that respond with transparency, flexible commercial constructs and measurable outcomes will secure healthier, longer relationships. Buyers with the discipline to centralize contracts, run credible migration PoVs and demand cost transparency can convert stretched renewal cycles into lasting savings and safer vendor ecosystems.
The immediate task for CIOs and procurement leaders is pragmatic: treat renewals as strategic projects, not administrative items. Start early, quantify migration options, and use the leverage afforded by extended timelines to lock in predictable, outcome‑oriented, and migration‑friendly contracts — because the alternative is costly uncertainty at the moment you need innovation most.
Source: ET CIO Daily Morning Newsletter
Background
The short version: procurement calendars have stretched. Where once an annual or multi‑year contract renewal could be completed in a matter of weeks, many customers are taking months — sometimes three to five months longer — to decide whether to renew, restructure, or replace major IT contracts. That delay is not evenly distributed across the economy. Firms in manufacturing, oil & gas and retail are most likely to slow or postpone renewals because their revenues and capital plans remain tightly coupled to global commodity cycles, tariffs and consumer demand. By contrast, banking and enterprise tech buyers are actively funding digital modernization and AI initiatives and therefore still have headroom for discretionary IT spend. This dynamic matters for two audiences. For IT vendors — SaaS providers, systems integrators and cloud operators — stretched renewals increase revenue timing risk and raise the cost of sales. For CIOs and procurement teams, it creates an opening to reset pricing, architecture and vendor relationships in a way that improves resilience and lowers total cost of ownership (TCO).
Why some sectors delay renewals and others do not
The commodity, policy and demand sensitivity triangle
Three forces are driving prolonged decision windows in manufacturing, oil & gas and retail:- Commodity and pricing volatility. Oil & gas capital plans are being pared back globally as producers re‑prioritize cash returns and defer upstream investment, squeezing service firms and vendors that depend on predictable orderbooks. Industry analysts and major service companies have signalled declines in producer spending; upstream budgets look set to contract in some markets, creating a direct hit to contract pipelines.
- Trade and tariff uncertainty. Renewed trade probes and tariff considerations have pushed buyers to re‑calculate sourcing costs and timeline risk. For manufacturers with global supply chains, a potential tariff or quota can invalidate a multi‑year procurement forecast overnight, so procurement teams are taking more time to model alternative sourcing and inventory scenarios before committing to renewals.
- Demand cyclicality in retail. Retailers facing softer consumer spending and margins prefer to defer discretionary tech spend that doesn’t directly improve conversion or fulfilment economics. That makes them far more conservative at renewal time — especially for premium platform add‑ons and ancillary SaaS modules.
Why banks and enterprise tech still have discretionary room
Banks and many enterprise tech buyers are moving in the opposite direction. Several factors explain this divergence:- Regulatory and risk-driven modernization. Financial institutions must continually invest in compliance, cyber resilience and payments modernization. These are often non‑negotiable budget items tied to regulatory timelines and reputational risk. Many banks are doubling down on AI and fraud detection capabilities, which supports vendor relationships and renewals in those categories.
- Strategic AI and transformation initiatives. Enterprise IT spending forecasts show continued growth driven by AI, cloud and cybersecurity — categories that are receiving prioritized funding even where other discretionary spend is constrained. Analysts expect global enterprise tech spending to grow substantially, with AI and cloud investments making up a large share of that increase.
- Capital allocation and market structure. Large banks and tech firms tend to have steadier cash flow profiles and longer planning horizons, which makes them less sensitive to short‑term commodity swings. That stability gives procurement teams more confidence to proceed with renewals when they are aligned to strategic transformation.
What this means for vendors: revenue, risk and the negotiation playbook
The immediate impact for vendors is a predictable one: longer sales cycles, higher churn risk at renewal windows, and increased price pushback. But the structural responses that vendors choose will determine which companies win the current renewal wave.Short-term vendor risks
- Revenue timing and recognition pressure. Longer renewals delay bookings and can create quarter‑to‑quarter volatility; for publicly traded vendors this compresses visibility and can trigger negative market reactions.
- Higher cost of sales. Extended negotiations mean more demos, proof‑of‑value projects and bespoke pricing proposals. Companies that budget for standard renewal conversion rates will see margin erosion.
- Customer churn from aggressive repricing. A subset of vendors have attempted steep uplift strategies or repackaging that forces customers into higher tiers. That approach can accelerate churn and invite regulatory or legal scrutiny if escalations become widespread. Internal procurement playbooks and community discussions show buyers are more willing than before to litigate or pursue regulatory complaints if they perceive unfair licensing changes.
Practical vendor counter‑moves
Vendors that want to survive and grow should consider the following:- Re‑design renewal offers to reduce friction by offering flexible payment terms, fixed‑price migrations, or staged consumption-based models that limit one‑time shocks.
- Expand the value conversation beyond features to measurable outcomes (e.g., TCO reductions, time‑to‑value guarantees, SLA credits). Demonstrable ROI shortens cycles.
- Invest in pre‑renewal engagement: supply usage analytics, architectural health checks, and migration risk assessments well before the renewal notice. Early engagement builds leverage and reduces late-stage churn battles. Forum procurement playbooks emphasize the power of starting the renewal playbook 12–24 months in advance.
- Build migration and exit tooling into contracts to reassure buyers. Clear data portability, escrow arrangements and documented migration paths deflate fear of lock‑in and reduce negotiation friction.
A CIO’s renewal playbook: how buyers can use the current window
For CIOs and procurement leaders, the current environment is a rare chance to reset vendor economics and shore up long‑term resilience. The next section distills a practical playbook based on procurement best practices and community experience.1. Create a single source of truth
Inventory and classify every contract, SKU, renewal date, and owner. Centralisation is non‑negotiable. When renewals are fragmented across teams, vendors exploit asymmetric information. A single contract ledger lets procurement identify consolidation opportunities and avoid duplicate spend.2. Segment by criticality and migration cost
Label licenses by business‑criticality and estimate migration cost for each: business‑critical, strategic but replaceable, and low‑value/replaceable. This triage determines negotiation posture and whether to pursue consolidation or migration.3. Start early — the two‑year calendar
- 24 months before renewal: audit inventory, map alternatives, build migration cost models and consolidate licenses where possible.
- 12 months before renewal: issue RFPs for high‑spend items, run proofs-of-value on alternatives, and engage legal to negotiate exit and continuity clauses.
- 6 months before renewal: negotiate hard, present migration cost as leverage, enlist cross‑product discounts and demand transparent pricing mechanics. Procurement teams in community forums echo this staged approach as the most effective way to avoid last‑minute vendor leverage.
4. Use measurable leverage in negotiations
- Require usage‑based billing transparency, pre‑renewal consumption dashboards, and the right to an independent audit.
- Demand predictable pricing mechanics (caps, fixed multipliers) and long notice periods for any metric redefinition.
- Ask for vendor performance guarantees tied to defined business outcomes with clear remedies or credits.
5. Consider staged migrations and fallbacks
If a vendor insists on steep increases, execute a staged migration to an alternative or open‑source stack with a pre-defined cutover plan. This credible migration threat reduces vendor leverage and speeds convergence.Cloud, AI compute and the supply-side tension
One underappreciated force complicating renewals is the rise of AI‑driven infrastructure costs. Running large models and offering advanced GenAI features require expensive GPU capacity and data‑centre buildouts. Cloud providers and AI platform vendors are passing parts of those costs through new product tiers and pricing lines — a structural change that affects renewals where advanced capabilities are required.- Analysts highlight continued demand for AI‑optimized infrastructure and rising data‑centre capex across major cloud providers as they race to support model training and inference. That cost pressure is a common vendor justification for new pricing constructs.
- For buyers, this means an additional negotiation axis: you are not just buying software or services, you are buying an ongoing share of compute and storage. Providers that bundle AI features behind higher‑priced tiers create a procurement trap if buyers are unprepared to manage consumption. Community guidance recommends insisting on cost forecasting tools and monthly consumption alerts before committing to multi‑year terms.
Market signals: what executives should watch
- Capital spending guidance from major industry players. Oilfield services and energy firms have signalled cuts to upstream spending and capital budgets; those are reliable leading indicators that vendor orderbooks in related markets could be softening.
- SaaS and platform pricing stories. High‑profile pricing overhauls (and the regulatory noise that sometimes follows) create outward pressure on the market; vendors that have recently repriced should expect buyers to scrutinize contract fine print. Forum posts show buyers are tracking these events closely and sharing negotiation playbooks.
- Enterprise IT spending forecasts. Independent analyst forecasts that show solid continued growth in AI, cloud and security indicate there will be pockets of robust renewal activity — particularly in banking and regulated verticals. Those are also hotspots where vendors can differentiate with outcome guarantees.
Strengths and opportunities in the current market
- For buyers: There is unprecedented leverage to demand better terms, stronger data portability, and vendor accountability. When renewal timelines stretch, buyers gain time to pilot replacements and build credible migration alternatives.
- For strategic vendors: The window rewards vendors who help customers reduce TCO and provide predictable pricing. Offering modular, measurable value is differentiating.
- For cloud & AI service providers: The AI demand wave remains a growth vector. Vendors that transparently link pricing to predictable consumption, provide FinOps tooling, and support cross‑vendor portability will win long‑term trust.
Risks and red flags
- Overreliance on short-term price increases. Vendors that seek to recover AI infrastructure costs through aggressive one‑time uplifts risk accelerating churn and attracting regulatory scrutiny. Forum analysis warns that headline percentage claims can be directional but are sometimes not verifiable across an entire market; buyers should treat specific percentages as indicative, not absolute.
- Execution risk during transitions. Large procurement reversals or rapid migrations can cause operational outages and security exposures if not executed with rigorous runbooks and retained vendor assistance. Historical restructuring episodes in banks show that losing institutional knowledge or ring‑fencing the wrong teams creates second‑order risks.
- Compute and capacity mismatches. Vendors promising GenAI capabilities without clear capacity planning can deliver poor performance or sudden cost surprises. Buyers must insist on performance SLAs and consumption forecasts before committing.
- Macro tail risk. Tariff developments, sudden commodity price moves or geopolitical events can invalidate multi‑year business cases, especially in manufacturing and energy. Contracts should include clauses that allow reasonable change management for material external shocks.
Practical checklist for CIOs negotiating renewals today
- Inventory every contract, owner and renewal date; centralise governance.
- Classify contracts by criticality and migration complexity.
- Start renewal strategy 12–24 months ahead, with alternative vendor PoVs active by month 12.
- Demand transparent usage reporting, consumption alerts, and monthly reconciliation.
- Require data portability, escrow and documented migration playbooks in the contract.
- Negotiate outcome‑based SLAs with financial remedies to tie vendor incentives to business results.
- Run a 90‑ to 180‑day proof‑of‑value before signing multi‑year renewals for AI or high‑consumption services.
Conclusion
We are in a transitional procurement regime. The convergence of commodity volatility, trade uncertainty and a surge in AI‑driven compute demand has broken the old rhythm of predictable renewals. For sectors tightly coupled to global markets — manufacturing, oil & gas and retail — renewal decisions are now a strategic lever tied to broader capital allocation decisions. For banks and many enterprise‑tech buyers, the imperative to modernize — especially around AI, cloud and security — keeps renewal pipelines healthier.That divergence creates both risk and opportunity. Vendors that respond with transparency, flexible commercial constructs and measurable outcomes will secure healthier, longer relationships. Buyers with the discipline to centralize contracts, run credible migration PoVs and demand cost transparency can convert stretched renewal cycles into lasting savings and safer vendor ecosystems.
The immediate task for CIOs and procurement leaders is pragmatic: treat renewals as strategic projects, not administrative items. Start early, quantify migration options, and use the leverage afforded by extended timelines to lock in predictable, outcome‑oriented, and migration‑friendly contracts — because the alternative is costly uncertainty at the moment you need innovation most.
Source: ET CIO Daily Morning Newsletter
