Enterprise Software Licensing Negotiations: Insider Tips

For any business today, purchasing enterprise software (ERP, CRM, BI and supply chain apps) is probably unlike any other corporate activity.

“Of all the assets that an enterprise acquires, enterprise software brings with it the most unusual, onerous and restrictive set of constraints,” notes Forrester Research VP and principal analyst Ray Wang, in a brand-new report on software licensing best practices.

[[ For more enterprise software strategies, see “Gag Me with a Contract: These Software Licensing Tactics Should Be Illegal” and “How to Win CFO Friends and Influence Business People: Quantify IT Investment Risk.” ]]

Even putting the pain and stress of the actual vendor negotiations aside, complexities in today’s high-tech systems, new SaaS and virtualization options, and ongoing vendor consolidation all conspire to make the process of software buying ever more difficult.

Which is where Wang’s second and updated version of his Enterprise Software Licensee’s Bill Of Rights” report (subscription required) comes in very handy: It lists 47 basic rights that software licensees should expect from their vendors.

In December 2006, Forrester published the first version of Wang’s groundbreaking report. The intent of the analysis was to create and improve a “reusable contract negotiation model that cuts across the five key phases of the software ownership life cycle,” Wang notes. These categories included: selection, implementation, utilization, maintenance and retirement.

Now, in light of an ever-shifting vendor landscape and a global recession, Wang has added 11 new best practices gleaned from more than 1,000 interactions with CIOs and IT professionals.

“CIOs, business process and apps professionals, enterprise architects, and procurement experts should immediately review and incorporate these best practices into their vendor relationships, contract strategies, and packaged apps strategies,” Wang writes.

Here’s a brand-new “right” (what companies should expect or, rather, demand from their vendors) from each of the five strategic categories:

Selection: Fair support for new virtualization options.

Implementation: Provide an appropriate executive sponsor.

Utilization: Permit customers to freely share modifications with one another.

Maintenance: Carve-out (unbundling) options for support and maintenance.

Retirement: Deliver pain-free migration paths to the next version.

Why is this important now? Wang states that now is the time for “enterprises to re-establish ownership rights, remedy past grievances and regain power…. Customers should push for these rights around how software should be owned and licensees treated.”

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