With increased competition and cost pressure in the property and casualty industry, insurers are rapidly modernizing technology and moving to the cloud. Top SaaS vendors like Guidewire and Duck Creek are playing increasingly important roles in insurers’ modernization journeys. Getting the correct licensing for your enterprise needs is critical to the success of these strategic partnerships. Read on to learn the key aspects that go into Guidewire pricing to negotiate smarter and make more informed purchasing decisions.
How does Guidewire charge for its platforms?
The most common Guidewire products we see clients use are InsuranceSuite and InsuranceNow. For both platforms, Guidewire’s annual fees are charged as a percentage of the annual Direct Written Premium (DWP) of the procuring enterprise.
An incremental license fee applies to all DWP increases once the enterprise exceeds the DWP baseline contracted during the term period. The incremental fee is typically staggered in nature and decreases as a percentage with increased DWP.
Negotiating the right fees for the platform remains a key stepping-stone to realizing commercial success and increased ROI for the platform. Some of the key negotiating levers in SaaS vendor management scenarios are:
Five factors to focus on beyond fees
While subscription fees remain the most important aspect of the commercial agreement, the following factors play a key role during negotiations:
- Non-production environments
The number of non-production environments (NPEs) included in the subscription is an important parameter to consider.
Similarly, Guidewire provides additional credits that can be redeemed to provision NPEs. These NPEs are typically used to provision dev, test, pre-production environments and come in multiple sizes from Guidewire – Standard, Enhanced, Performance, etc. Since these environments are chargeable (post credit redemption), it becomes extremely important to internally calibrate enterprise requirements for NPEs and understand if the provided credits will suffice now and in the future.
- Price renewals
Price hikes during contract renewals are one of the most dreaded conversations for an enterprise, especially for a niche vendor like Guidewire. Negotiating favorable terms around price renewals is critical. Typically, we observe enterprises pushing for renewal prices to be capped at a mutually agreeable percentage.
- Price lock-in
Guidewire typically provides multiple add-ons like Predictive Analytics, DataHub, etc., at additional costs. While these may not be immediate enterprise requirements, they may later become necessities. In certain scenarios, Guidewire offers price holds for some of these products.
We recommend price lock-ins at the time of contracting for add-ons that may become requirements in the future and also advise that customers take these two additional steps:
- Be sure the price lock-in term is longer to take into consideration the implementation period
- Negotiate a broad price lock-in that includes all add-ons that may become future requirements
- Service credits
In addition to the core product, Guidewire significantly cross-sells its services. It typically offers service credits that come with conditions. Using service credits is restricted up to a certain percentage of the invoice value (thereby allowing Guidewire to bill for the remaining invoice amount) and the credits expire.
Both of these conditions are geared towards allowing Guidewire’s professional services arm to make inroads into the client environment. Based on our benchmarking engagements, some of the key negotiation points for clients remain around service credits adequacy and the validity period, and the increased usability of each invoice.
- Support costs
Support costs are an often-overlooked aspect of the agreement. As is the case with most top SaaS vendors, platform support remains with the product vendor, and the cost is baked into Guidewire’s licensing fees. However, Guidewire charges a certain percentage of the subscription fee for extended support if the enterprise is currently on an earlier product version.
This can be a tricky scenario since enterprises may choose not to upgrade due to various reasons – making this one of the most important aspects to benchmark and negotiate as part of your SaaS vendor management.
To learn more about how Everest Group can help your enterprise optimize and navigate through your Guidewire license procurement and SaaS vendor management, please reach out to [email protected].
Learn more about pricing in the services industry in our webinar, Outsourcing Pricing: 3 Pitfalls and 2 Unknowns Enterprises Need to Know in 2022.