On possible benefits of shorter contract durations

A smart friend of mine sent me this suggestion:

"I received this email from Adobe about the price increase that they were passing along on my software subscription for Acrobat pro (see below). It comes to 33.5%! I thought, wow, demand is good and with inflation they are taking an opportunity to really raise price… I read it as some pretty strong news for many enterprise software companies.

“On a few conference calls I have heard the recurring theme that contract lengths are shortening which is reducing the growth in RPO. While I have not heard or seen any discussion of this, it occurred to me that in an inflationary environment, the short contract length could be a positive as it allows for more frequent price increases. [This is a known pattern in other sectors like real estate investment trusts where apartments and self storage with short leases are acknowledge as bigger beneficiaries from inflation than office or Shopping Mall might be with longer leases.]”

I wonder what you people think of this? (I suspect that in an uncertain macro like this our companies will be afraid to raise prices, but we’ll see as we come out of this).




I like it. And I mostly agree with what you suspect…although I will say, as expenses go up for our companies, that will help them justify raising their own prices.

But in general, we love to see rising RPO, but we forget that a big reason customers want to sign long contracts is to save money. So for a sticky subscription product, short contracts are fine with me!