How to prepare for a license agreement renewal

contract renewal

In order to have a business relationship, you need to have an agreement, being it a non-disclosure, partnership or a license agreement. The purpose of any agreement is to define the rights and responsibilities of each party with regards to the subject of the agreement and to provide a reference for answering future questions regarding each party’s obligations that might arise. It should provide certainty and predictability throughout the term of the agreement. Every contract should be evaluated at least once per year (or more often if the contract length is shorter than one year) to get a perspective on whether the contract is still covering your needs, what its value is for your company and if a renewal should be considered. Previously, I tackled the importance of using the renewal of a license agreement to your benefit. Today I’d like to guide you through the basic steps to take before renewing your license agreement.

Involve everyone – well, not quite everyone in the company, but everyone that can help you make the right decisions. This usually means all departments and functions that are directly affected by the agreement: Procurement, Finance, IT, Legal and Software Asset Management. When renewing agreements, it is important to include everyone to prevent any contradictions or problems when it comes to legal obligations and billing.

Review your current contracts – make sure you have a clear picture of what is stated in your agreements, so you know what you want to keep and what you want to remove or change. You should set your contracting goals. This is particularly important for companies with a large contract portfolio or those engaged in lengthy, complicated contracting arrangements.

Review your effective license position – you should always be compliant and have this overview but when facing a license agreement renewal, it’s especially important to know what products are installed and what is used in case you will want to terminate or replace older licenses with newer ones.

Plan for future needs and/or organizational changes – here you should consider all the possible scenarios for your organization in the near or mid future. Is your organization planning to move to cloud and if so, what’s the cloud roadmap? Will the current licensing models address your needs throughout the next 3 years? Are acquisitions/mergers/divestitures likely to happen in the near future? Before renewing a license agreement, you should have answers for these kinds of questions.

Set clear goals for negotiation – know your strategy and stick to it. A SAM expert can help you prepare a negotiation strategy prior to starting the negotiation. A specialist can help you understand the publisher’s particularities in terms of license agreements or strategic products and can help you leverage them to your advantage.

Be proactive – Don’t wait until the last minute to plan your renewal because this will increase stress levels, and you may not have enough time to really dig into the specifics. With sufficient time and expertise, you can go through all the steps mentioned above to maximize the value of your license agreement.

Once you start the actual renewal negotiation, make sure everything is in writing – it’s not uncommon that clients have verbal agreements or email confirmations on topics ranging from bigger discounts to license exchange options and non-standard use of the software. Make sure that all agreed upon terms and conditions are being captured in the contractand seek advice in case any of the terms are unclear. Verbal incentives and additional benefits are habitually left out of agreements. By law, if terms are not documented in the signed agreement, they never existed.

You should never allow yourself to be pressured into signing something that isn’t 100% clear to you. After all, it’s better to be safe than sorry.

If you have any questions about your upcoming license agreement renewal, don’t hesitate to reach out to us.

This article was published on 15-11-2018