Worked costings and choosing a provider
Managed security renewal increases: uplifts, expiring discounts and log-volume steps
Worked examples of how renewal uplifts, added users, expiring first-year discounts and log tiers raise a managed security bill, and how to negotiate caps and notice periods.
A managed security renewal can cost far more than the headline uplift suggests, because several increases stack: the percentage uplift on the existing fee, users or devices added at the new price, new log sources or a higher log tier, and the end of any first-year discount. In the default example in the uplift calculator, a "6% uplift" becomes a 28.2% increase in the annual bill. The way to control it is to model the renewal before you sign, ask for a written cap, and diarise the notice date so you can negotiate or leave on your terms.
This guide supports the selection method and the three-year worked example. All figures are illustrative, ex GST.
Example 1: one renewal with growth
| Line | Calculation | Amount |
|---|---|---|
| Current annual fee | 25 users × $84 × 12 | $25,200 |
| 6% uplift | $25,200 × 6% | $1,512 |
| 3 users added at the new price | 3 × $1,068 ($89.04 × 12, rounded) | $3,204 |
| Increase from uplift and users | $1,512 + $3,204 | $4,716 |
| New log source (cloud application logs) | Annual | $2,400 |
| New annual total | $25,200 + $4,716 + $2,400 | $32,316 |
$32,316 ÷ $25,200 = 1.282, so the bill is 28.2% higher. Only $1,512 of the $7,116 increase is the uplift itself. Growth is not bad, but it should be in the budget, not a surprise on the invoice.
Example 2: the expiring first-year discount
Providers sometimes discount year one to win the business. If the renewal reverts to list price:
| Year | Price per user a month | 25 users a year | Change |
|---|---|---|---|
| 1 | $84 (20% off a $105 list price) | $25,200 | – |
| 2 | $105 (list) | $31,500 | +25% |
If you had negotiated the discounted price as the renewal base with a 5% cap, year two would have been 25 × $84 × 1.05 × 12 = $26,460, which is $5,040 less. Always ask: "Is the year-one price the base for renewal, and what is the maximum increase?"
Example 3: compounding uplifts versus a cap
| Year | 6% a year | Capped at 3% |
|---|---|---|
| 1 | $25,200.00 | $25,200.00 |
| 2 | $26,712.00 | $25,956.00 |
| 3 | $28,314.72 | $26,734.68 |
| Three-year total | $80,226.72 | $77,890.68 |
The 3% cap saves $2,336.04 over three years on a flat head count. Uplifts compound: year three at 6% is $25,200 × 1.06 × 1.06, a 12.36% rise over two renewals, not 12%.
Example 4: log-volume tiers
Log-based services jump when you cross a tier. In the illustrative MDR and SOC guide, moving from 15 to 28 GB a day raised the log line from $4,500 to $8,400 a month. Before renewal, ask for a usage report and whether any sources can be filtered.
Example 5: USD price and exchange rate
For a USD-priced service, a 7% USD uplift with an AUD that buys 5% fewer US dollars raises the AUD cost by about 12.35%. See USD pricing, FX and GST.
What contracts say about renewal prices
| Clause | Meaning | Risk to you |
|---|---|---|
| Fixed renewal price | Same price next term | Low |
| Capped uplift ("no more than X% or CPI, whichever is lower") | Increase limited | Low to moderate |
| Then-current list price | Renewal at whatever list price applies | High; discounts can disappear |
| Price change on notice during the term | Provider may change price mid-term | High; may be open to challenge as an unfair term in a small business standard-form contract |
| Auto-renewal with long notice period | Renews unless you object weeks or months ahead | High if you miss the date |
Terms that let a provider change the price while you cannot leave may be unfair contract terms. Since 9 November 2023 unfair terms in standard-form small business contracts are prohibited and can attract penalties. See SLA and contract questions.
Negotiating the renewal
- Before signing: ask for a renewal cap in writing and that first-year discounts carry forward.
- Diarise the notice date: set a reminder well before the notice period starts.
- Ask for a usage report 90 days before renewal: users, devices, log volumes, incidents and SLA performance.
- Re-run the market every two or three years using your scope brief, even if you intend to stay. A real alternative is your best negotiating point.
- Trade term for price carefully: a longer term for a lower uplift can be fair, but only with a clear exit if service fails.
Frequently asked questions
What is a normal renewal uplift?
There is no standard. Some contracts link increases to CPI, others to the provider's list price. Ask for a cap.
Can a provider increase price during the term?
Only if the contract allows it. If it does so on short notice with no exit right, the term may be challengeable in a small business standard-form contract. Get advice.
Should I include GST when budgeting a renewal?
Budget cost ex GST if you are registered, and plan cash flow including GST. Use the calculator with 10% to see the GST-inclusive figure.
What if we reduce users?
Check whether the contract has a minimum commitment. Some allow reductions only at renewal.
Sources
- Australian Competition and Consumer Commission — unfair contract terms and small business
- Australian Small Business and Family Enterprise Ombudsman — dispute help for small business
- Australian Bureau of Statistics — Consumer Price Index, if your contract links uplifts to CPI
