More software negotiations top tips

Change of control – Beyond escrowing source code, you could try wording the deal so that you get license, maintenance and implementation fees returned if the vendor or product is sold off during the first year. Why? Because few products remain unchanged after another company acquires them. Material change should include asset sales, acquisition, divestiture, loss of founder and insolvency.

Entitlement – Software vendors often use the accumulated maintenance fees you’ve paid over the years to develop a new-but-similar product line, and then ask you to pay a new licensing fee to get full access to the new product. Don’t wait until this new product is released; instead, incorporate greater self-protection into the original contract just in case.

Sunsetting policy – Consider writing into your contract the minimum advance warning you would need if the vendor decided to retire the product you’re licensing. How much you’ll need depends on whether your organization typically runs the most current revision level or an older version. It’s advisable to become as current as your budget and timeline will allow.

Enterprise pricing – All bets are off when it comes to user counts and hardware infrastructure over the next few years. Ensure that your license doesn’t tie you to a disadvantageous cost structure or pricing model that becomes obsolete when you adopt cloud computing, for instance.

Maintenance fees – Vendors typically link maintenance fees to a fixed percentage of the “then current list price of the software.” And since some vendors increase their list prices faster than the cost of living and/or faster than your business will grow, consider tying maintenance fees to the Consumer Price Index, for instance, instead of the software’s list price.

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