Service savings calculations
How would you calculate the savings when you renew a service agreement, as you know the majority of the service agreement (Preventative or Corrective maintenance) would have an increased of 2-5% on annual basis, and I'm wondering if I would consider last year base spend towards the new increased rate I would end up with a negative savings figure.
Could you please share with us your experiences and how would you calculate services savings? is there any relation with inflation rate somehow?
thank you for your feedbacks.
Yaarub Askar, CPSM, CSCMP
Annual renewal is not the best practices for many types of services. Why not try renewal every 3-5 years. That will require a good assessment of the supplier and see if they are reliable and consistent in performance. By committing stable business volume, you are entitled to ask for discounted prices on multi-year contract due to supplier's continuous efficiency improvement in service provision, hardware cost drop in IT industry, etc.
Even if it's year over year renewal, you shouldn't just accept 2-3% price increase if you continue give the same business to the same company.
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