Have you ever sat there and thought: “negotiating software contracts is very much like professional road cycling”?

No? Thought not. Yet there are similarities, which you’ll find listed below – and with them, some best practices that ensure you will always get the best deal!

It all starts with a clear objective

For a cycling team, their performance goal might be to achieve the highest possible number of stage wins. Commercially, they could be tasked with achieving a certain level of TV coverage for their sponsors.

For the CIO and IT leaders investing in software solutions, there will be a similar combination of performance and strategic goals:

  • Performance – achieving a cost-effective deal that helps make the most of the existing infrastructure (and avoids the dreaded ‘shelfware’)
  • Strategic – ensuring the right capabilities are on hand to support the business plan

Thus, it’s vital to clearly determine what success ‘looks like’, in terms of finding the best deployment model, licensing structure, support agreement, and total cost.

Assessing the ‘what’

But how best to approach this? Especially when there can be competing pressures driving behavior? As Gartner highlights – software negotiations can mean different things to different job functions. Hence the collaborative importance of thorough preparation.

As with the resources available to any cycling team for checking equipment and the route ahead, software negotiation rewards those who are best prepared.

This, of course, starts with the usual due diligence: researching the market, suppliers, and capabilities. An in-depth understanding of what’s needed is the basis for defining what you want. The next step is then to compare this to what you have.

Calling on uncle SAM

It’s here that Software Asset Management (SAM) enters the picture – or at least the people with the best understanding of the assets and software licenses currently in place.
Indeed, before any new contracts are signed, the CIO should be asking:

  • Are we already paying maintenance and support for licenses not in use? And could they be re-purposed?
  • Can we re-use or harvest licenses that have been ‘retired’?
  • How will any new software acquisition impact our overall compliance position?

Any SAM team can consider themselves best practice if they offer real-time access to this type of information. And, for businesses, such insights can mean the difference between negotiations based on intuition and those based on educated business decisions.

Stronger bargaining power

Let’s turn now to the negotiation process itself. Mark Bartrick at Forrester offers some interesting views on possible improvements, embedded into a coherent software sourcing strategy. In his article he lists 4 critical phases:

  • Preparation – the due diligence part (discussed above)
  • Support – bringing together the right voices (read: cross-functional teams) to cover all disciplines and expectations relevant to the process
  • Control – staying on top of the negotiation, vendor behavior, and internal communications
  • Educate – last (but by no means least) is to ensure all involved (from users to executives) are aware of the differences between good and bad procurement

Key recommendations

But what about more tangible advice? Here are 4 tips to always keep in mind:


#1 Understand how the software vendor works

By getting to know their set-up, interests, and goals, you’re better prepared for the direction negotiations could take.

Each vendor has its own approach to negotiating agreements, and knowing the ‘how’ can help identify who is authorized to make concessions.

#2 Know your rights

Never assume you have the right to use a specific license. In fact, experience teaches us to assume the exact opposite.

Problems occur when users believe they have certain rights, only to find themselves out of compliance and liable for penalties. The solution: confirm what is explicitly written in the contract, ask for examples, and avoid verbal promises or emails.

#3 Avoid ambiguities

Software licensing is about the right to use the software in a very specific way. The language in any contract, therefore, needs to be closely scrutinized.

For example, if the agreement includes the term ‘allow for internet use’, what exactly does this mean? That users can access the app from the Internet – or can that company put information onto the internet for people to access?

Differences in interpretation can quickly lead to damaging consequences.

#4 Get everything in writing

Everything. Including all agreements regarding concessions, special terms and conditions drafted into a formal document that is part of the overall licensing agreement.

Too often, last minute changes don’t make it to the final agreement (mailed notes and verbal promises don’t have any legal status) and guess what – it’s too late! If it’s not in the agreement it doesn’t exist.


Downhill all the way

No cyclist can win in isolation. Instead, success is a team effort, and the bringing together of different skills, knowledge, and processes – from the right preparation to the best race strategy.

Similarly, software negotiations require a dedicated focus and the right team. It’s a process that involves many intricacies, and where one poor decision can have far-reaching and long-term implications.

To help ensure your business is always wearing the yellow jersey, COMPAREX offers considerable expertise in SAM. We can help you maintain a clear view of what you have, what you need, and the best way to bridge the gap.

Let’s put you firmly in the saddle.


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