Software Publishers’ Standard Contracts Contain Many Traps For The Unwary
Technology changes can undermine familiar language in software license agreements. Developments in how we deploy and use software can change the meaning of important terms. We see many software salespeople exploit legal shades of grey to bill customers for products and services that the customer never intended to purchase.
Use Forrester’s Checklist To Spot Common Causes Of Subsequent Disputes
The downloadable toolkit associated with this report will help sourcing professionals focus their scrutiny of license agreements on the most important issues. It can help you ensure that the main license grant is sufficiently broad, that the license metrics are future-proof, and that the contract protects you against subsequent mistreatment.
You Can Also Use The Tool To Track Each Negotiation’s Progress
You can continue to use our software contract checklist tool as you maneuver through the negotiation process to track concessions from either side. This will allow you to more easily review negotiation status with colleagues, help you balance gives and gets, and give contract approvers a holistic view of the final deal.
Why Read This rep
Business technology (BT) evolves rapidly, yet software companies’ standard license agreements fail to keep pace with that evolution. Changes to the way we deploy and use software make familiar language unclear, which in turn creates a risk of compliance disputes. Sourcing professionals can use the checklist tool associated with this user guide to zero in on the key issues that most frequently cause compliance problems and contract disputes for our sourcing and vendor management (SVM) clients. It lists the questions you should ask and rights you should demand in the key clauses. We have also designed it to help you track negotiation progress and summarize the final deal, so you can show contract approvers what you’ve obtained and where you’ve had to compromise. This report was originally published on November 14, 2013; Forrester reviews and updates it periodically for continued relevance and accuracy.
Software Publishers’ Contracts Contain Many Traps For The Unwary
Many sourcing professionals struggle with software company license agreements. Software salespeople know that you have limited time to review in full their draft contracts and lack the leverage to gain all the changes you would like to make to the clauses. This problem is exacerbated by new commercials models that complicate contracts — such as software-as-a-service (SaaS) creating new contractual challenges — and by technology changes undermining existing contract language. Forrester receives many requests for help from clients with their software license reviews. Clients ask us:
- Which terms are most likely to cause problems for me at a later date?
- How have recent technology changes invalidated old, familiar contract language?
- What new issues have emerged that I may not have encountered previously?
Our Checklist Can Help You Identify The Most Common Pitfalls
Software companies insist on using their boilerplate as the starting point for any negotiation, but they often fail to update that boilerplate frequently enough to keep pace with technology changes. Moreover, they are reluctant to agree to amendments, due to the extra work it involves for them and the potential implications for their accounting, performance management, and license compliance processes. Therefore, you need to focus your review and negotiation efforts on a few key clauses so that you can mitigate the biggest risks and rectify the most dangerous omissions
Forrester’s software contract review checklist, which is available as a downloadable tool linked with this report, can help you do this (see Figure 1). We have incorporated the insight from hundreds of client interactions in our software contract review checklist and have updated it to include some new issues and to reflect recent trends. Use this tool to:
- Focus your review of a software publisher’s license agreement on the most significant risks. Update the spreadsheet with a link to relevant text in the contract document as you first read through it. Then consider, for each checklist line in turn, whether the contract is clear and complete.
- Set priorities for your negotiation strategy. You consume bargaining chips as you persuade the vendor to accept changes, and you cannot win every battle. So assign a priority level to each issue that the checklist identifies so that during the actual negotiations you can apply your leverage where it will have most impact.
- Help the negotiation team obtain a balanced deal. As you reach the end of the negotiation you can rate how effectively you resolved each issue. This will help you ensure that overall you got as much from the vendor as you gave up, in terms of demands that you relaxed. Sourcing leaders can use such an assessment to grade their team’s performance, ensuring that individual buyers address contractual flexibility and risk in addition to discount percentages.