How to negotiate your contract renewal?
In a previous article, we discussed the steps that you should take into account before the renewal of your license agreement, including the most important aspects that should be considered. In this article we will focus on the most daunting phase: the negotiation. Negotiations can be difficult; it’s an even more daunting task when there are your business’s needs at stake and some huge amounts of money involved. There is no universal recipe for how to get the best deal. Each business’s needs are unique, and therefore each deal is unique. Nevertheless, the negotiation process is largely the same, no matter if you’re negotiating in the Turkish bazar or at the table with a powerful software publisher. The below provides a number of tips that may come in handy when you have to negotiate your license agreement renewal:
Know what you want to buy – determine your Bill of Materials (BOM)
If you already went through the previous preparation steps, you reviewed your license entitlement and deployment position and you determined the future demand of your business. This exercise dictates what software licenses, cloud services or support and maintenance services you need to obtain. When you know this, you’re ready to be at the negotiation table.
Contractual terms – specify what you require
Bring your own draft of the contract in which you included all the terms and clauses that you need and lacked in the previous contract. Not being prepared with what contractual terms and conditions are important for yourselves (e.g. customer definition, assignment possibilities, audit clauses, divestitures etc) will result in a situation in which you will most likely be signing up for the standard contractual terms of the publisher.
You might ask for a lot and only receive a part of it. Don’t forget the other part has its own expectations and priorities. Be realistic and if you can’t get everything you want right now, ask for the rest to be provided at a later stage.
Pursue a win-win situation
Since both parties have set their own objectives (and some of these might be contradictory) the best approach is to be reasonable and try to reach a win-win situation where everyone wins or there’s an equitable compromise from each part. Think two steps ahead and consider that you’re not only signing a contract but you’re maintaining a long-term partnership.
Take your time and don’t sign on the spot
There’s no rule saying that you only negotiate once. If you’re not 100% sure you get the deal that you want (and even if you are) you should still ask your legal department to review the contract before signing. In the heat of the moment you can miss on important aspects. Read the contract carefully, if you don’t understand something, ask for clarifications. If you don’t agree, ask to discuss again that point.
Ask for help
There’s no shame in admitting that negotiating is not your cup of tea so if you don’t feel up to it, we highly recommend hiring someone to help you. Someone with experience in software licensing contracts will know exactly how to tackle every tricky aspect of your contract.
Contract negotiating is a fine art about finding a middle ground that both parties are happy with. The goal is to build bridges and to work together. If the end result is not exactly what you expected, it’s not a losing situation, it’s a learning one.
Since 2015, Roxana is a Software Entitlement Specialist focused on educating clients on licensing issues with Oracle, SAP and Microsoft. In her role, she works with customers to assist them in understanding and improving their software environment by reviewing their software license agreements and provide them advice regarding legal and financial risks. With a legal background, she also helps customers identify legal weaknesses in their contracts and optimize them.