Analyzing Software Support Agreements – Best Practices

Timothy J. Opelt, CEO, SMS Strategic Sourcing

Any software agreement should be governed by documented policies that are regularly reviewed and updated in this ever-evolving marketplace. Too often, software agreements are reviewed for pending negotiations with no clear policy that has been rooted in expert practices that ensure a successful negotiation each time.

Industry-leading practices require that policies contain each of these core elements: centralized management, comprehensive asset/license inventory, methodology for ongoing inventory tracking, articulated process for regular asset/license review and a model for sufficient training. Sadly, most companies are lacking well-prepared policies to guide procurement and improve negotiations.

Prior to reviewing any software agreement, the company should have a documented requirements checklist that has been sniff-tested by the company’s legal team, senior procurement and an independent team of procurement consultants. At the bare minimum, this checklist should include the following items:

Product

  • Use rights that meet the enterprise/business need (perpetual, term, worldwide, etc)
  • Level of support, maintenance, upgrades and updates provided
  • Does the license granted correspond with the use needed?
  • Is the definition of the licensee accurately/adequately addressed?
  • If necessary given the use needed, are third parties and/or client use permitted
  • Pricing locks for incremental seat acquisition and/or price caps due to growth
  • If necessary, hopefully not, is business downturn contemplated
  • Training prices
  • No automatic renewals
  • Included manuals for any purchases or upgrades
  • Installation included
  • Protective language addressing future evaluation of product
  • Pricing benchmarks

 

Support

  • OS upgrade guarantee
  • Escalation procedures articulated
  • Service levels and response time for each
  • Penalties for missed SLAs
  • Clear support hours
  • Caps on support cost increases
  • Plan to support discontinued products
  • Billing that differentiates as policies require
  • Pre-paid discounts
  • Benchmarking of maintenance/support costs
  • Software escrow as needed for products/updates/upgrades

 

Terms & Conditions

  • Brand use clause (complies with company’s brand guidelines)
  • Payments due not less than net 30 from invoice
  • Assignment limitations
  • Audit rights/limitations and potential audit risks
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Timothy J. Opelt, CEO, SMS Strategic Sourcing

Founder and visionary of SMS Strategic Sourcing’s business model and got-to-market strategy with over 30 years of Information Systems, Procurement, Contract Management, and Commercial Business Operations leadership with progressive, dynamic Fortune 500 corporations. Tim is a proven strategic ‘big picture’ thinker capable of forecasting and responding to industry and commercial challenges. Seasoned leader of large Procurement organizations and a ‘Trusted Advisor’ to C-Level executives delivering bottom line and top line results.