What is an Enterprise Software Negotiation?
If your business is making use of new enterprise software, this could be beneficial for various operations and activities. However, you should ensure you understand all terms involved so that you can negotiate the process to get the most favorable outcome.
Read the rest of this article to explore enterprise software negotiation in greater detail, how to achieve it, and why you should consult with a lawyer for legal guidance.
What are Key Terms in Enterprise Software Negotiation?
There are various enterprise software terms you should know about and which you could negotiate for your benefit.
Pricing
Enterprise software solutions tend to use the following pricing systems:
- Size-based pricing. Fees are charged according to your business size, such as how many employees you have. This means a larger company could have to pay more for the service because more people will use it.
- Transaction-based pricing. This is when the software usage is charged according to how many transactions are made or how often it’s used.
- Outcome-based pricing. In this pricing method, costs are selected according to measurable results as evidenced by the software.
You should check that the pricing method outlined serves you and your business needs.
Exit Clauses
You need to be sure you have the chance to cancel or scale down your subscription without getting stuck in a lock-in situation. It should be clearly stated when you can give notice to end the agreement and what obligations you might have to fulfil after the contract termination, such as in terms of data protection.
Renewal
When the contract ends, how can it be renewed? You want to avoid any automatic renewals that can lock you into contracts, be a waste of money if you’re not going to be using the software, and could result in expensive pricing over time.
Audit Rights
These rights mean that the vendor is allowed to verify compliance with the contract terms, such as by having access to your company systems and checking usage logs from time to time. They can feel invasive, or be expensive, so you want to ensure you understand what’s said about them in the contract.
How Should You Negotiate Enterprise Software?
Before you enter into negotiations with a vendor, you want to ensure you have considered the following points.
Know Your Goals
Think about what you want to achieve with the software, as well as what is essential to have in your contract versus what would be nice to have but isn’t necessary. This will ensure you can negotiate without accepting an offer immediately that doesn’t give you the benefits you want.
Time it Right
When you choose to negotiate with your software vendor it is important. Start your negotiations at least six months before you have to renew your license so that you have enough time to make offers and counteroffers. If you leave it to the last minute, this can result in a stressful experience because it doesn’t give the vendor a chance to consider your offer.
Review Your Contract
Some software contracts can be challenging to understand or vague, which can make parties misinterpret clauses or clash over specific terms. Before negotiating, make sure you thoroughly review and understand the software agreement, or you could risk price hikes and hidden costs.
You can hire a lawyer for a contract review to give you peace of mind that you understand everything in the document and know what you want to negotiate.
Post your request for a contract review on the ContractsCounsel marketplace. Include some details about the project and you’ll receive multiple bids from lawyers. You can select the best lawyer to work with based on criteria such as their level of experience, previous projects they’ve completed on the platform, and client ratings.
Consider What You Need
Before you renew your contract, take stock of the software you’ve used and how you’ve used it over the last 12 months. This will help you calculate how much you need and if you need to consider a different subscription plan.
Explore Subscription Options
There should be subscription options outlined in the contract so that you can choose the best one for your needs. You might want to negotiate if your usage isn’t matched to a specific subscription option or you expect growth in your business. Vendors could provide discounts for such situations, so it’s worth chatting to them about this.
Be Careful About Longer Contract Terms
Although vendors might suggest that you sign up for a longer contract to achieve lower pricing, it might not work for you depending on how much you expect to use. It’s common for enterprise software to cost more based on your usage.
Don’t Forget About Audit Rights
Review the audit rights clause in your enterprise software contract. Since they can be expensive, you want to reduce their frequency. You could suggest that you only have one audit right per year. Or, you could limit their scope, such as by only letting the vendor review specific systems in your company instead of all of them.
Get all Changes in Writing
Whatever contract changes you and the vendor agree on, you need to get them in writing. This will prevent issues, such as the other party going back on their word and disputes that land you in legal trouble.
Do You Need a Lawyer for Enterprise Software Negotiation?
Although you can negotiate your enterprise software agreement on your own, you should consider hiring a lawyer for assistance. They can help you in various ways throughout the negotiation process. Here are some things to bear in mind before you decide not to work with a lawyer.
- Enterprise software contracts can be complex. Your lawyer will help you navigate terms such as indemnification, data ownership, and contract termination.
- Legal contract reviews can help you identify red flags. Your lawyer is skilled at reviewing your legal documents so they can spot vague, confusing, or misleading wording that could put you at risk.
- Lawyers will help you stay compliant. Your lawyer will help you check that all privacy and security rules are aligned and clarified, so you don’t have legal problems.
- Price increases can be one-sided. A lawyer is skilled at negotiating your software pricing with vendors to get you the best deal.
- International contracts can be tricky. If you’re involved in international operations, you want to ensure that you meet all compliance laws and avoid hidden risks.
Get Help with an Enterprise Software Negotiation
Hire a lawyer from ContractsCounsel who has experience in helping clients with reviewing and negotiating their enterprise software agreements. They have the skills to help you navigate the negotiation process, prioritize your needs so the contract works for you, and minimize your legal and financial risks.
