Vincent Smyth, EMEA General Manager at Flexera Software offers some advice on getting valuable terms included in license contracts, and the value of an Enterprise Licence Optimisation strategy to help reap financial rewards

Most software contract negotiators focus mainly on software cost, but other factors that allow more flexibility of software deployment and portfolio composition will yield far greater benefits in this business climate of frequent reorganisation, mergers and acquisitions.

An extreme example where cost and not terms became the priority was highlighted at a recent Users Group meeting of a well-known ERP vendor, where the CIO of a large DIY chain proudly announced that he had negotiated a 95% discount from that vendor.  Subsequent details emerged that licenses had been bought for every employee when around 15% of that number would have sufficed, thus bringing the effective discount down to around 67%.  Considering that subsequent annual maintenance fees (which are usually not discounted and are payable every year) would be due on an inflated number of licences, my guess is that the vendor was not dissatisfied with the outcome.

The terms listed below are not necessarily offered by the vendor but we’ve found can often be accommodated within the negotiation process.  By defining terms that allow an organisation to change, yet still be effectively serviced by software contracts, large payments / adjustments / penalties may be avoided.
 
These valuable terms could include, but are not limited to the following:

    Removal of limitations on geographic and organisational scope.

    Ability to change the portfolio of software licensed by allowing access to new functionality / feature sets. This is particularly useful when negotiating contracts for concurrent licences, commonly used for engineering applications.

    Allowing exchange of software as processes or organisational profiles evolve.

    Ability to increase quantities licensed at the access rate negotiated for the initial contract. (Again, this may be most suitable for concurrent licenced applications. In other cases, there are volume discount tiers that come into play).

    Stipulation of behaviour of software under given circumstances (license time-out, abnormal end).

    Ability to "park" unused software for a period of time and remove licenses from maintenance.

    Definition of maintenance rates applying for the contract duration.

    Ability to absorb mergers and acquisitions into existing contractual terms.

    Definition of vendor interfaces to maximise efficiency and limit access by the vendor to specified individuals and functions.

This approach, incorporated into an Enterprise Licence Optimisation strategy will not just improve a vendor licence compliance position, it will offer a strategic approach to understanding the software needs of the enterprise so that software deployed contributes to efficiency and effectiveness whilst maximising return on investment and reducing costs.  Enterprise licence management is one area where automation can potentially reduce overall IT costs by 5% – 10% annually. Enterprises need to re-evaluate their approach and focus not just on cost, but on contract negotiation and automation of licence management to reap the most financial rewards.

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