Finding the right software for your business can be a daunting task. Searching through dozens of potential candidates, talking to references, viewing demonstrations and trying out the software yourself demands time and effort. Settling on the software product that you want isn’t the end of the process, because now you have to negotiate the actual purchase.
In order to make this process go smoothly, consider these five tips for negotiating a software contract:
1. Take your time
Don’t be rushed into a decision. There can sometimes be pressure to conclude a negotiation as quickly as possible. However, ensuring you are informed and understand the nature of the deal, the contract and the product before you go ahead is essential. This will help to avoid any misunderstandings or mix-ups which might cause future problems for you or the software vendor. Use your time to read up on typical contracts in the industry, become aware of the implementation process, compare the pros and cons of several products and vendors and talk to references and peers who have already undergone similar processes.
2. Have a backup plan
It is a good idea, if possible, to negotiate with two credible vendors at the same time, assuming that both have a solution that would meet your needs. Doing so gives you a wealth of comparable information on the products and services the two firms are offering and gives you more helpful industry knowledge when dealing with either one of them.
3. Negotiate everything
You can negotiate the software price, number of licenses, implementation prices, implementation process, duration, terms of payment, annual maintenance fees and anything else you’ve been presented with in the vendor’s contract. There may be some things that are harder to negotiate down than others – maintenance fees are one example – but many vendors are willing to offer concessions on a broad range of things, as long as you are willing to ask.
4. Ask lots of questions
Part of concluding a successful negotiation is making certain you ask the right questions, both of the vendor and of your organization. For example, where exactly will the new software be deployed? Who will use it? What are their requirements? These types of questions will help you frame the negotiating process in your own mind before even sitting down at the negotiations table.
- Things to consider asking the vendor include: how are the terms of the contract defined? (For example, what is meant by “installation” and “user?” How is a successful implementation defined?) What happens if you sell the division using the software to another company? What is the procedure for customizing the software.
- You should also spend time asking about the layout of the contract: what might be potential snags and sticking points, and what are the important clauses you might not be aware of? For example, an Evergreen Clause is a renewal clause that automatically renews maintenance agreements after the negotiated ones expire. This might be something you’ll want to consider as you plan your future use of the software.
5. Plan for the future
The future is uncertain, and when negotiating a software purchase you want to make sure to account for every eventuality. For instance, will you have access to the source code if the vendor goes out of business and can no longer provide support? Make sure a contract provides for ownership of the source code to be held in escrow on your behalf against just such a possibility. In the case of excessive system downtime or some other major problem with the new application, include provisions allowing you to be compensated by the vendor. Be specific about which problems require compensation, and also make sure to be fair in the amount of compensation you ask for.