5-year contract – it’s a trap!
Posted 14/10/2020 by growe
Being locked into a contract and experiencing buyer’s remorse is not only frustrating, it can also be very expensive. Buyer’s remorse is associated with the sense of regret we feel after making a purchase.
In a workplace context, handing over a service to a third party is a major decision, and the potential for buyer’s remorse in the first few months of a contract is high, especially when your Managed Service Provider (MSP) is not delivering.
How do you avoid it? Well for starters, you should avoid getting locked in to a 5-year contract. This does not however mean avoiding any and all contracts – a near impossible feat. Without contracts, Managed Service Providers would never make any money.
At razorblue, our most valuable asset is our staff and we need to know that at the very least the cost of employment is covered. We believe in a thorough onboarding process and due to the huge amount work and preparations undertaken behind-the-scenes, tend not to make money within the first few months of a contract. To ensure our clients receive the best service possible, we believe that starting contracts from 1-year basis is not only necessary, but fair.
Mark Wilkinson, Commercial Director says: “We have confidence in our capabilities to deliver and provide the best service possible to our clients, which is why we don’t feel it is necessary to unfairly lock them into long contracts. We often see customers coming to us from other providers who are locked into contracts and become frustrated when performance diminishes and they struggle to move to another provider. Our method has worked extremely well for both ourselves and our clients, which is why we have many clients who have chosen to work with us for over a decade!”
Here’s why 5-year contracts should be avoided:
1. The ever-changing technology landscape
Locking yourself into a 5-year contract is a risky move, especially in the IT world. The fast-paced and ever-changing landscape of technology means that product offerings depreciate at a faster rate than they typically would for other industries. Even when we purchase the newest of the new, there are always experts working behind the scenes to adapt and improve the product in readiness for the next launch.
Take the evolution of smartphones as an example. In the last five years alone there have been 10 versions of the iPhone released. Naturally, each version has improved features and consumers are more than ready to upgrade by the end of their 24-month contract. Signing up to a 5-year mobile contract is unheard of, so why settle for less when it comes to other technology services?
Now think about the bigger picture. Consider all the latest technological capabilities that your business could be taking advantage of but can’t due to being locked into a 5-year contract. Worse yet is the idea that your competitors do not face such limitations and are at the forefront of these advancements.
2. Poor performance
Ever heard of the term “honeymoon phase”? With most 5-year contract suppliers, you’ll find that everything is going well at the start of your relationship. The customer service sweeps you off your feet, your account manager promises regular catch ups, the team are fast to respond to any issues. Promises are made and you trust that they will be met.
Fast forward a year and things start to slip. You haven’t heard from your account manager in months… There have been a few issues, but you struggled to get in touch with someone… Meanwhile competitors are boasting about new technologies that are driving their business forward, but you haven’t been offered such opportunities.
But then, a few months before your contract is due to end, things start to look up. You’re getting all the attention you deserve now, and your service provider has just contacted you with another “amazing” offer on this now very familiar product offering. You can’t resist, this time it will be better and look at that price saving! You sign into another 5-year contract, and so, the cycle continues…
3. Fixed, higher price
Committing to an IT service offering for a long period of time also means you are locking into a fixed price for the premium product at that time. For example, the price of internet connectivity has dropped by around 50% in the last 3 years. If you signed up to a 5-year connectivity contract 3 years ago, you would now find yourself paying double the current value for the remaining two years of the contract.
4. Expensive ‘free’ incentives
To lock you into 5-year contracts companies often offer ‘free’ incentives, such as free install charges or free connectivity for a year. Whilst the term ‘free’ is enough to get anyone’s attention, the cost saving is miniscule in comparison to the overall cost that you will be charged. They make an exceptional profit from this ‘free’ offering.
5. It’s a trap!
Breaking contract is not only a complex and time–consuming process, it’s also an expensive one. If the relationship breaks down between yourself and the supplier there is very little you can do if you have signed a strict contract agreement.
Over the years, we have seen many clients previously locked into contracts with other suppliers who have been promised regular meetings, high levels of performance, dedicated account managers and ongoing technology recommendations that are in-line with future business plans. Unfortunately, this was never delivered and the relationship between the client and consumer inevitably broke down.
At razorblue we work with clients to find technology that will work best for their business and continue to recommend any new service offerings that we feel would benefit them. When renewing we try to keep costs down and work with the client on growth and improving business efficiencies and performance.
We prefer short contract terms
Here at razorblue, we like to shake things up and question the norm.
We have full confidence in our ability to deliver and exceed on customer expectations. At near 100% client retention, our technology-focused and relationship driven approach to IT assures we stay ahead of the pace of change in the workplace.
Each client receives a dedicated Account Manager, whose technical knowledge and expertise ensures that you get the very best and appropriate technologies to enhance your business.
We don’t believe in 5-year contracts, instead we believe in a 5-star service and building a long-standing relationship on trust and rapport. This has worked for us for over 13 years and is why we continue to grow.