The Numbers
Sub-1-year contracts: 4% of new logos in 2023, up to 13% in 2026. Three-year deals: 28% down to 23%. Average sales cycle: 25 weeks in H1 2025, down to 19 weeks in H2 2025. Data from ICONIQ's State of Go-to-Market 2026 survey of 150+ B2B software executives.
Buyers are making decisions faster but committing for less time. That combination tells you where confidence actually sits right now.
What Changed
A VP of Sales at a $100m+ ARR AI startup put it plainly at a board meeting: everyone wants to buy, nobody wants to sign a long-term deal. Why lock in for three years when the market leader in your category might look completely different in 12 months?
This is not buyer hesitation. It is buyer rationality. In categories where multiple vendors are spending heavily on product development, and where AI model costs keep declining, committing to a multi-year contract at today's prices for a solution that might be obsolete in 18 months is a bad bet.
Consumption pricing is making this worse. When buyers cannot precisely forecast usage because the product category is new or their own AI workflows are still being figured out, finance teams will not approve long-term commitments. Hybrid pricing is now the primary model at 48% of companies. The more variable the pricing, the harder the multi-year sell.
What This Means for Sales
Stop discounting to get three-year signatures from buyers who fundamentally want flexibility. You win the deal and lose the renewal at month 18.
If you are offering shorter contracts, your comp structure needs to reflect it. Net New Recurring Revenue as a comp metric jumped from 25% to 33% of companies in one year. Net Dollar Retention rose 5 points. Your sales team needs to be rewarded for quality, not just TCV. A 12-month deal that expands 150% beats a three-year deal that churns.
The answer to shorter contracts is a better post-sales motion, not a better sales motion. Customer success-sourced pipeline wins at 52%, higher than sales (43%), channel (39%), or marketing (27%). When CS owns expansion and customers can see ROI within six months, you get the renewal. That is the new contract cycle.
Chris Degnan, former CRO of Snowflake, said it directly: companies want to give employees choice in tools, but they will not sign long-term contracts in an AI world where the best solution can change in months. They want options.
This is the new normal. Shorter commitments, faster decisions, and expansion revenue that depends on delivering value before the first renewal hits. Plan accordingly.