10 Critical Software Negotiation Tips
By Dennis Sommer, Founder & CEO, Executive Business
Finding the right software to meet your business
needs is the easy part. Negotiating the best
software and service contract can be difficult. Here
are ten tips that will make software contract
negotiations easier and make you more successful.
1. Negotiate with the software vendor at the end
of the vendor's sales quarter or preferably at the
end of their fiscal year. Vendors are more likely to
negotiate in your favor when they are ready to close
2. Negotiations should start during the
evaluation and selection process when you, the
customer, have the most leverage. During this time,
start negotiating the price for the software, yearly
maintenance, training, and services.
3. Negotiate an agreement to put the software
source code in an escrow account. When a software
vendor is no longer willing or able to maintain the
software, an escrow agent is empowered to turn over
the source code to the licensee.
4. Negotiate the best Total Cost of Ownership.
Evaluate your cost options for a one year contract
to ten or more years to determine what provides your
company with the best return. Longer term contracts
will provide you with the best negotiating position
and cost reductions. Determine the expected "life of
the product" and make sure the contract does not
extend past that expected timeframe.
5. Retaining a software attorney early on in the
evaluation and selection process will reduce risk
and effort required by your internal staff.
6. Define a Service Level Agreement for software
support that covers a schedule of necessary response
times based on problem severity.
7. Understand the vendor's process for support
problem escalations. The process should describe
"when" a problem is escalated and to "whom".
8. Get in writing and understand what is included
in the maintenance agreement. Look for items like;
provide bug fixes, corrections to any programming
that doesn't produce as expected, periodic
enhancements, software upgrades, support team hours
(i.e. 24 hours, 7 days a week), support contact
methods (phone, email, etc.), minimum period they
will be supporting the purchased version, minimum
allowable support period.
9. Anticipate future maintenance pricing changes
based on business changes which may cause the vendor
to change the way they price maintenance in the
10. Understand your rights as the licensee if
your company merges or is acquired. Will the
maintenance contract be transferred directly to the
new company or does the new company have to
renegotiate the maintenance contract with the