Companies are signing shorter, costly software contracts to keep up with AI tools

Companies are increasingly willing to shell out more money on shorter-duration software contracts if it gives them the opportunity to test-drive the newest AI tools.

A January IT Brew poll found that almost half (48%) of 283 respondents have inked shorter software contracts to keep up with the latest and greatest AI tools. Another poll showed 49% of 380 respondents have seen at least a 25% price hike on these short-lived contracts.

Trial run. Michael Hornby, CEO of tech service provider Techmentum, said he is seeing clients opt for shorter contracts and even monthly subscriptions for AI tools, partly because the tools are new and they don’t know what to expect.

“It’s like marrying someone before you date them,” Hornby said. “You don’t really know what you’re getting yourself into.”

When it comes to that higher price tag, Hornby said it’s often not a huge sticker shock for companies compared to other IT expenses, and the added expense can end up being worth it in the long run.

“What they’re buying when they’re paying the premium for the monthly is…an insurance premium. It gives them flexibility to switch products [and] to switch vendors,” he said.

Testing, testing…Natalie Glance, chief engineering officer at Duolingo, told IT Brew in August that the coding tool landscape is rapidly changing, with new offerings enticing employees. When Claude Code first hit the scene, the language-learning app company “fast-tracked” its security review and approval process so its employees could use it.

“My stance on this, which I’ve communicated with the team, is we need to move to six-month contracts,” Glance said. “We used to always have one-year contracts, but this space is moving so quickly that you sign a contract and then the next week, you wish you were trying another tool instead.”

Appfire CTO Ed Frederici told IT Brew late last year that committing to one AI tool nowadays is a large risk because “tomorrow, something better might come up.” As a result, he said the evolving AI tool market has made him more willing to sign shorter software contracts.

“I am paying a slightly higher price because I am not signing a long-term deal, and I’m doing it consciously so that I don’t end up wasting money in the long term,” he said.

What’s an IT pro to do? For companies sampling AI tools, Hornby recommended booking contracts with the shortest length, then graduating to a longer-term contract once you’re sure the tool is a good fit.

“Once you feel comfortable that this is the right tool, then lock into a longer contract to save yourself money,” Hornby said. “But don’t do that until you’re really confident, because we see the cancellation rates on these tools [are] rather high, and now you’re paying for a tool that you don’t use.”