The term of a vendor contract is something that we take for granted. In enterprise products, a 12 month term is pretty common. In SaaS we are used to month to month. In the past year, I’ve had some bitter experiences with long term contracts. The experience has been enlightening for me.
There is something very revealing about the length of a contract from a vendor. In month to month, there is a mutual understanding that I, the customer, agree to keep paying and using the service as long the vendor continues to build and support a great product. On the other hand, a 12 month agreement is not a relationship at all. It’s more like a one night stand. Once you are through the convincing parts of the deal, and signed a contract, there is no longer a responsibility to keep the relationship going on a short term basis.
This has actually been my experience with companies who force annual (or longer) contracts. If I did a graph of the number of times I heard from my “dedicated rep” it would be a huge spike before and after the signing, then a few blips to either upsell me on more or renew my agreement. From a customer point of view, there is nothing worse than being locked in to a service that you don’t want. The end result is resenting the company instead of merely thinking it was a bad fit.
At Wildbit, I only deal with a few vendors who require long term contracts. It’s mostly out of necessity and not choice. As a person who both runs software products and uses them, I prefer month to month. As a product owner it forces me to maintain the relationship that I started with my customers. As a customer, it allows me to choose the product that fits best as I change.
There are some examples where annual agreements make sense. For instance, if the up front cost for the vendor is very high. This is sometimes the case in dedicated server hosting, and certainly with colocation. The initial cost is spread out over the longer term contract. Although, even some companies, like Softlayer, have managed to create a process allowing short term dedicated servers. There are also cases where the customer service is so good that the long term contract does not matter, because you enjoy the product so much and don’t plan on leaving.
I’m interested in hearing some opinions. Have you had long term contracts where the company went beyond expectations? Was it the opposite?