I lead digital strategy for a specific business unit within my company. We use third-party software as well as custom developed apps. I oversee product and engineering teams.

With the advancement of AI and new startups coming around, I’m having a hard time deciding on what should be our third-party vendor strategy. Most of these vendors want me to sign three-year deals, but I’m seeing a bunch of new players in the market. Continued below…

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they jacked the price up if I wanna do one year, but I’m also spending a decent amount of money on implementation.

How do you think about these large term contracts with legacy vendors when we don’t even know what the next 1 to 2 years will be

3-year deals made sense when software categories were stable. with AI tools evolving this fast, locking in for that long is a real gamble. I'd push for annual with clear exit clauses even if the per-year cost is higher — the flexibility is worth more than the discount right now.

Here's the thing about software. It's not just about whether you can use AI but also whether you can develop all of the business logic perfectly that your paid software is supposed to do.

Like, could you get AI to build software for expense management? Sure. But then you gotta maintain it. The distance between MVP built with AI and production ready software is narrowing but it isn't zero.

So really the contract term, to me, comes down to the opportunity cost. If AI were perfect, at what point will you have the resources to build and maintain a production ready replacement? Once you've answered that, you can start to figure out how long you want to keep the software around.

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