ARTICLE: 3 Steps to Negotiating Software Agreements

Daryl Ullman is a Software Licensing Consultant at Emerset, a company he founded in 2004. Daryl has eleven years experience in IT including seven years at Microsoft in Israel.

Here he shares his unique three step process for negotiating software license agreements;

STEP ONE – GAP ANALYSIS

Step One is to perform a Gap Analysis. We take a detailed look at our clients licensing status. This requires some form of software inventory tool to find out what is installed and usually involves some level of data cleansing to in order to build a clean inventory of installed assets. We collect anywhere up to six years worth of historical license records from the customer and vendor, their contracts, purchase history and build a statement of entitlement. We can then provide a licensing status report.

STEP TWO – FINANCIAL ANALYSIS

Step Two is Financial Analysis. We use data from the Gap Analysis and look at what the customer is planning 3 to 6 years from now. We look at what projects they have on the horizon, their strategic plans and compare and contrast this to the vendors roadmap and upgrade plans. We make sure the relevant agreements are in place and look at the various options available to the customer. Finally we look at the ramifications 3 to 6 years down the line for each agreement option. How it works out in terms of their projects, financials and their agreements.

STEP THREE – PLANNING THE NEGOTIATION

Step Three is when we begin planning the negotiation. This part is rarely performed by customers before a negotiation – even when millions of dollars are at stake. There is no negotiation strategy. We work with the customer to define the goals of the negotiation of the new contract. How much are they going to spend? what is their budget? We set out the differences between maintenance payments and new licenses and agree soft objectives such as support benefits, training vouchers and training.

Daryl claims that using this 3 step process in negotiations saves his clients 10% – 30% on licensing costs.

If you have any experience, techniques or advice for negotiating software license agreements please contact us