Negotiating Price Uplift Caps
Intro: Why Uplift Caps Matter
Uncapped Broadcom renewals can quickly inflate your IT budget.
Broadcom is notorious for aggressive post-acquisition price hikes – we’ve seen renewal quotes jump 7–10% or more annually when no cap is in place. Without a Broadcom price increase cap, you’re essentially writing Broadcom a blank check for each renewal.
A price cap is the single most important clause for cost predictability in a Broadcom deal. It forces any yearly increase into a manageable range. Read our overview, Key Contract Terms to Negotiate in Broadcom Agreements (Commercial & Legal Clauses).
In other words, negotiating a Broadcom renewal price cap is your best defense against surprise fees and ballooning multi-year costs. It gives your CFO and board the budget stability they demand.
Mistakes to Avoid
- Mistake: Accepting uncapped renewals. Risk: Broadcom can double or triple your fees at renewal with no limit, blowing up your budget. Fix: Insist on a hard annual cap (around 3–5% maximum) for any renewal increase. This prevents nasty surprises and keeps cost growth predictable.
- Mistake: Allowing CPI-based increases without a ceiling. Risk: High inflation can drive huge price jumps year over year, and if those increases compound, costs snowball. Fix: If Broadcom insists on tying fees to inflation (CPI), negotiate “CPI or the cap, whichever is lower” – and no CPI floor (no minimum increase if inflation is low). Also, make it explicit that any CPI-based increase is non-compounding (calculated off the original price each year, not on an already increased price).
- Mistake: Letting the cap apply only to licenses (but not support/add-ons). Risk: Broadcom can skirt the cap by jacking up maintenance or add-on subscription fees instead. Partial caps leave large chunks of your spend unprotected. Fix: Ensure the cap applies to all recurring fees, including licenses, support, maintenance, and any add-on services. Close any loopholes so every dollar of your contract is shielded under the cap.
- Mistake: Ignoring compounding mechanics. Risk: Even a “reasonable” 5% cap explodes to over 15%+ increase after three years if applied on top of the previous year’s price (compounding effect). Fix: Write in the contract that increases are non-compounding – each year’s percentage applies only on the baseline original price. That way a 5% cap stays a 5% per year simple increase (not interest-on-interest).
- Mistake: Not negotiating a year-one hold. Risk: Broadcom might raise your fees immediately after signing the deal, catching you off guard in month 13. Without a price hold, you could be hit with an uplift right after committing. Fix: Lock in a 12-month price hold at the start – no increases in the first year. This gives you one year of breathing room and ensures value from the initial price before any price increase takes effect.
- Mistake: Caving when Broadcom pushes for 7–10%+ increases. Risk: Overcommitting to Broadcom’s steep terms early means losing leverage. You’ll be stuck with an inflated baseline and no recourse, especially in a long-term deal with no exits. Fix: Push back. Counter with stair-step caps (e.g,. 3% in year 1–2, 5% in later years) or offer a longer contract only if the cap is lowered. If Broadcom flat-out refuses caps, consider a shorter-term agreement or partial termination rights – trade a bit of commitment or volume to keep annual increases in check. The key is to limit your exposure and force Broadcom to earn those uplifts.
Quick Checklist for Uplift Protections
- Cap on increases: 3–5% max per year (hard cap).
- CPI clause: “CPI or cap, whichever is lower” (and no mandated minimum increase).
- Non-compounding: Each increase is applied to the original base price, not in addition to prior increases.
- Scope: Cap applies to all recurring charges (licenses, support, maintenance, add-ons).
- Year-one hold: No price increases in the first 12 months of any new agreement.
Mini-FAQ
Q: What is a typical Broadcom renewal uplift?
A: Broadcom often initially proposes a 7–10% (or higher) annual uplift on renewals, sometimes tied to an inflation index (CPI). In practice, this is a starting point – strong negotiators can often whittle that down by securing a cap or other concessions. The key is not to assume Broadcom’s first number is non-negotiable.
Q: Can I negotiate CPI-based increase clauses?
A: Absolutely. If Broadcom wants inflation-based increases, you should insert language to protect yourself. A common approach is specifying that any CPI-linked increase is “CPI or [the agreed cap]%, whichever is lower.” Also, eliminate any CPI floor (so if inflation is near zero, you aren’t forced into a minimum hike). And always stipulate no compounding – each year’s increase should be calculated from the original price, not piled on top of last year’s increase.
Q: What if Broadcom refuses to include a cap?
A: If Broadcom won’t agree to any cap, you need to safeguard your position in other ways. One tactic is to shorten the term of the deal – for instance, opting for a 1-year or 2-year renewal instead of a 5-year term. A shorter commitment limits your risk and lets you renegotiate sooner. You can also negotiate price locks for that term or even partial termination rights (the ability to drop certain products or reduce volumes at renewal time). These measures ensure that if Broadcom insists on unfettered pricing, you’re not handcuffed to runaway costs for long. Essentially, no cap means you should retain an escape hatch or an early re-negotiation opportunity.
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The Playbook: Winning the Cap Negotiation
Approach Broadcom renewal talks with a clear game plan. Lead with your best-case ask: a strict 3% annual cap (or CPI, whichever is lower), applied to everything, non-compounding, with a year-one freeze. This sets the tone that you expect reasonable, fair terms.
If Broadcom pushes back, you can tolerate maybe a 4% cap – but only with strong protections in place (no compounding, no CPI gimmicks, cap on all fees, etc.). Make it clear you’re trading a bit higher percentage only in exchange for those safeguards.
As a final fallback, hold the line at a 5% ceiling. Even at 5%, insist there’s no CPI add-on above it, no floor, and no compound math.
And if you must accept closer to Broadcom’s terms, reduce your commitment length accordingly – for example, agree to that 5% for a 2-year term instead of 5 years. This way, you contain the risk.
In short, never accept Broadcom’s default uplifts at face value. Negotiate caps aggressively, and if you can’t secure an ideal cap, mitigate the damage with term and scope adjustments. This playbook ensures you maintain cost control and keep Broadcom in check on renewal pricing.
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