Best practices negotiating enterprise software the blend. Ultimately, the software license agreement may be a product of significant negotiation between the licensor and the. Diagnosing software problems is costly for any vendor, particularly when problems are not easily made to recur. This is another point of negotiation, particularly if your company is acquiring several applications. The software maintenance cost is driven by a percentage of the initial software license fee which is usually between 1625% of the license cost per year. And when the cost of an upgrade is equivalent to putting in new software despite. Top ten tips in negotiating service agreements insights. Gather requirements the first step in managing software maintenance costs is to take an analytical approach to requirements and cost of software maintenance. Software maintenance negotiations best practices dod esi. Cloud computing agreements, software licenses, and other it contracts, for lawyers and businesspeople, 2nd ed.
Five negotiation tips for cutting sap maintenance contract costs. This agreement also recognizes that corel corporation is motivated to continue to be a part of the iu software environment. Nine key points help oems negotiate better contract service agreements with ems providers there is an old saying, you win business on price and lose it on service. How to negotiate a better deal on enterprise software next article. This is a complex area, and so this article is intended merely to give a few pointers as to what you should look out for when negotiating your software maintenance agreement. News analysis and commentary on information technology trends. How to negotiate software maintenance contracts and obtain. Note to self start renegotiating your q4 software maintenance contracts now. There may be some cross over between these two agreements, however the applicability and terms of both agreements are usually a matter of negotiation between the parties in each instance. Other companies fail to negotiate the software license agreement in tandem with the implementation proposal.
By treating dell as a general reseller, for example, you can purchase its servers and desktops and buy software licenses normally from hp and microsoft, along with security appliances and software. Its great that youre about to sign on a new client. Tips on negotiating it equipment and software contracts. You may have a software licence, software support and maintenance agreement. Before obtaining maintenance services, consider what level of maintenance you require. A learnasyougo approach that leads to delayed contracts and puts your company at risk and leaves contract. Governmentwide acquisition contracts gwacs offer federal agencies access to software, training, and professional services as part of a total it solution. Negotiating software contracts key initiative overview. Software pricing considerations software maintenance. What are the best practices for software contract negotiations.
Attorney david tollen is the author of the american bar associations bestselling manual on technology contracts, the tech contracts handbook. Jan 21, 2014 also, do the discounts apply only to the purchase of the software or to the maintenance as well. Payments and term the schedule of payments and the term of the contract depend upon each other. Companies that get experienced guidance through negotiating an erp contract can reap significant benefits with initial purchase and longterm protection. A warranty is one of the most important contract provisions in a software contract. Just like everything else that you need to purchase from a supplier after the initial purchase of the product, equipment, of software, the best time to control your future costs is prior to making the initial purchase. Negotiating software contracts is a necessity for individuals and businesses that are planning to invest in any type of software. May, 2016 negotiating software contracts successfully negotiating a warranty section. It is the lowest total cost, at the highest intrinsic value. Jan 25, 2011 using automation to reveal where software is installed, who has access and how many licenses are in use daily can also save. Mar 28, 2014 the software maintenance cost is driven by a percentage of the initial software license fee which is usually between 1625% of the license cost per year. The software companies make the contracts so complicated specifically to put you at. A contract is a legally binding agreement between two or more parties.
Standard support will cost 18% of net licensing fees, while enterprise support will eventually cost 22% by 2016. A software maintenance agreement builds a bridge between your business needs and a software professional. Sunday, june 8, 2014 capital equipment purchase contracts. May 20, 2014 know your needs and your vendor thoroughly, then negotiate value first, price next. The following steps should be taken prior to first entering or renewing a contract with a. This means that each party can legally enforce the terms of the contract against the other parties if they fail to comply with those terms.
The result is that it organizations can be outmaneuvered by professional sales teams, settling for the. If theres one thing that cios agree on, its maintenance fees. It managers and technology decision makers should read up on negotiating contracts with vendors before entering into any meetings or presentations from salespeople. Maintenance contract termination letter 3 easy steps. It would take them at least a few months before they customize and finalize the software for you. Beware of tempting year 1 discounts and expecting the vendor to give the same discount year 2. My book negotiating procurement contracts the knowledge to negotiate is available at us, amazon uk, and amazon europe. By signing below, both parties acknowledge they have read and understand all terms and conditions found within this software maintenance agreement. Negotiating software contracts successfully negotiating. Is there another way to negotiate service contracts. These negotiation tactics will maximize your gains either by bringing down the cost or getting more features for the same price. Negotiate the best software support agreement for a new it tool. All other contract negotiations should start no later than three months before conclusion.
Dod esi white paper software maintenance negotiations best practices 7 i. Consulting, specializes in helping companies negotiate contracts with oracle. It is all about learning how the supplier puts his billable rate bid together and how you can add value by working with him to reduce his costs, and yours. Imagine your software relationship starts with implementation or some other type of. Negotiating software contracts successfully negotiating a warranty section.
Tips for negotiating software contracts hartman executive advisors. Dod esi white paper software maintenance negotiations best practices i. Free software maintenance agreement free to print, save. Apr 15, 2009 customers who purchased software after early 2008 and paid the higher maintenance and support fees can move to standard support when their current maintenance and support contracts end. While the system is operational it must be maintained. Company, and the undersigned individual or entity you for the services and number of authorized users as referenced in a corresponding order form. Service contract checklist the journal of healthcare.
How to negotiate a good software subscription agreement. The us army corps of engineers, engineer research and development center erdc intends to negotiate on a sole source basis iaw far. The user pays a base license cost and then a yearly maintenance. Software maintenance is often more costly to provide than hardware maintenance because the solutions to problems have a highly trained labor component. Mar, 2020 negotiating a software subscription agreement with a major vendor is a challenge for even the most sophisticated it organizations. Chapter 27 software licensing and maintenance contracts.
Maintenance fees alone average 20 percent of enterprise software s original purchase price. Ill go over the other three major provisions of a software contract. Software purchase agreements formerly known as smartbuy offers commodity software and services at deep discounts. Sep 18, 2014 gordonbyrne also explains basic contracts for printer and copier maintenance. Hes a wellknown speaker and author in the field of information technology agreements and he provides training. Software license agreements checklist software contract. Chapter 27 software licensing and maintenance contracts v5. The signature sections in this software maintenance agreement template allow you and the software owner to esign this agreement from your computer, smartphone, or tablet acceptance.
Dont pay for maintenance or support before you need it. Too much time spent negotiating liability limitations. Software subscription agreements are often complex and confusing, and few cios have the resources or time to decode, much less drive, the negotiating process. You can also consider negotiating down the cost of ongoing maintenance, as opposed to the initial cost, as it is often the annual maintenance that. Clearedge estimated that companies leave up to 30% of their technology spending budgets on the table due to poorly structured contracts money that, if saved, could be used for other purposes or to buy more products from their vendors, garrahan said. Miro consulting helps companies analyze and negotiate enterprise software contracts, specifically microsoft and oracle licensing. For more on how to improve your it contract negotiations, check out garrahans webinar here. Engage business when negotiating it support contracts with vendors, be sure to involve an it person that understands the software and a business person that understands your particular contracts. The language will typically read that the supplier has all of the rights to assign the agreement, while the. A practical guide to effective softwarehardware contract. Issues of software support are usually addressed in a software support agreement ssa, which is typically separate to the software license agreement itself. Assignment clauses deal with the rights of each party should the software supplier sell to, merge with, or decide to transfer the agreement to another supplier. In this chapter, gordonbyrne explains why software maintenance contracts cost more and are more difficult to negotiate. This overview provides a highlevel description of the negotiating software contracts key initiative.
Any way you put it, maintenance contracts are money. Cios and it sourcing and procurement leaders can rely on this initiative to help them negotiate optimal software terms, particularly with entrenched suppliers or with new contracting models. Have a plan to address manufacturer recalls and published hazard reports, including changes to maintenance activities. Such agreements establish roles for the vendor, the consultant, and the. In summary, is there another way to negotiate service contracts. News analysis and commentary on information technology trends, including cloud computing, devops, data analytics, it leadership, cybersecurity, and it infrastructure. Sep 08, 2015 negotiating software as a service contracts guidance for corporate and technology counsel for structuring effective saas agreements todays faculty features. In that light, customers will be negotiating new sap maintenance contracts. Wang also talks about the types of deals sap customers are getting and why. Software vendors will want this paid upfront, but depending upon their financial quarters, this can sometimes be delayed until the beginning of the second year. Maintenance agreement get the vendor to delay payment on the first year software maintenance. In this podcast, ray wang, a partner with altimeter group and former vice president and principal analyst at forrester research, shares his five tips for negotiating better maintenance contracts. If your vendor asks for maintenance fees from the first day of work, it just doesnt make sense.
Juris software maintenance and technical support agreement. Software maintenance agreement template get free sample. You need to pay close attention to a couple of items in the software maintenance agreement as you negotiate the contract. As well, this agreement demonstrates that the university is committed to finding excellent software at competitive prices, and making a variety of products available to the iu community to ensure product and vendor diversity. The publishers risk of losing your renewal gives you leverage to secure a more favorable contract. If youre the one who owns a software support company or youre an independent software contractor, make sure you have a paper trail. Into existing maintenance contracts but every year is an opportunity to negotiate. Five tips for negotiating it support contracts with vendors. Once you have ordered and downloaded your it software hardware contract pack you will have all the content you need to get started with your own formal. However, service is more often than not an amalgam of several focus areas used to describe anything that does not have clear expectations and deliverables which should be stated in. Know how you will receive and implement software firmware and other updates when they become available. In accordance with the guidelines for use of the technology contracts, it is recommended that for each type of software, the agency aggregate its requirements and make as few purchases a year as possible. Software maintenance pricing fair or out of control. Writing and negotiating software and cloud computing contracts can be slow, risky, and intimidating, and few professionals receive effective formal training.
Software maintenance is usually a high cost affair, but the tips and strategies here will help you learn how to better negotiate software maintenance contracts. Mar 14, 2009 like it or not, software and hardware maintenance is a way of life in it. Why did iu negotiate a new software agreement with corel. Licensing a piece of software buys you only the right to use it. Prinz, the prinz law office, silicon valley, calif. First, those agreements help the service provider in its daytoday business of providing services and getting paid. Improve your it contract negotiations by focusing on 5 factors. Negotiating a software subscription agreement with a major vendor is a challenge for even the most sophisticated it organizations. Negotiating software contracts successfully negotiating a.
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