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October 2009    

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10 Critical Software Negotiation Tips

By Dennis Sommer, Founder & CEO, Executive Business Advisers

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 their books.

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 future.

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 software vendor?

Dennis Sommer is the Founder and CEO of Executive Business Advisers, a management consulting firm specializing in business growth, sales and profit improvement. He is specialized in improving business performance. He helps wide range of clients from small growth start- ups to Fortune 500 Companies, helping them find new strategies for stimulating sales revenue growth, attracting new customers, increasing profits and reducing costs without sacrificing service. . He is a highly sought after keynote and seminar speaker on sales, leadership and business best practices. Dennis is an international author, publishing over 80 articles on sales, leadership, project management and IT management topics. His latest best selling book is “Adviser Secrets- How to become a Top Performer”. For article feedback, contact Dennis at dennis@ebaac.com


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