Technology Expense Management (TEM) vendors often promote “savings guarantees” to assure organizations that their programs will reduce costs. This post explores what these guarantees really mean, how to manage them effectively, and where pitfalls often appear.
Why Savings Guarantees Exist
Savings guarantees are designed to help internal champions justify the investment in TEM programs to senior leadership. They provide a promise of measurable returns (usually enough to cover the cost of both the vendor and the internal program). For many organizations, this assurance is key to gaining executive buy-in and moving expense management projects forward.
Define “Savings” Before You Start
One of the most consistent challenges customers express is the lack of clear definitions. “Savings” can mean cost avoidance, contract optimization, process efficiency, or rate reduction, and those categories must be explicitly defined in the contract. Without alignment between finance and technology teams on what counts as valid savings, organizations risk disputes and frustration when it’s time to measure results.
The Hidden Work of Managing Guarantees
Tracking savings guarantees can become its own cottage industry. Some organizations report devoting as much or more time verifying vendor-claimed savings as they do on actual optimization work. This administrative burden underscores the need for clear processes, scheduled reviews, and transparent documentation. Regular check-ins (monthly or biweekly) help ensure claims are accurate and exclude initiatives delivered by internal teams rather than the vendor.
Transparency and Methodology Matter
Be aware that some vendors calculate savings using optimistic projections, such as annualizing short-term reductions or ignoring increases from poor recommendations. Contract terms should specify when and how savings can be annualized and ensure that only realized, not forecasted, outcomes count toward vendor fees.
Lessons from the Field
Know that there is the potential for unintended consequences of savings guarantees and gain-share models. Once the vendor meets its baseline guarantee, engagement can wane. Some customers have found that most savings occur during the first two to three years of a new contract (the “low-hanging fruit” phase) after which continuous improvement requires collaborative effort and shared accountability.
Best Practices for TEM Savings Guarantees
- Define all savings categories, approval workflows, and owner accountability in RFPs and contracts.
- Maintain separate tracking for vendor- and client-generated savings.
- Hold structured, recurring performance reviews to audit results.
- Budget for gain-share or contingency fees early to avoid surprises.
- Keep open communication and transparency at the core of the vendor relationship.
When managed properly, a savings guarantee can reinforce partnership, discipline, and accountability. When mismanaged, it can become an administrative weight or a source of tension. Clear definitions, structured oversight, and honest collaboration are the keys to turning guarantees into real, sustainable value.
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