SmartAdvice: When To Proceed With Caution About Outsourcing

Topic C: How should we approach renegotiation of our software licenses?

Our advice: A renegotiation is still a negotiation and should be taken just as seriously as if it were the initial contract. Like everyone else, software vendors have suffered in the weak economy and are anxious to increase their revenue. As a result, they may be pushing conditions that are unfavorable to users, such as invasive audits and unclear performance guarantees. The best way to protect yourself is to be thoroughly prepared. This includes knowing the alternatives in case you can't reach a favorable agreement with your current vendor. If you have other options, they will give you more leverage in your renegotiation.

If the original contract was "their paper" rather than your own standard software agreement, consider renegotiating this time from your own brand-new contract. Vendor contracts are crafted to protect vendors. Organizations such as ICN (International Computer Negotiations) and Caucus have refined the art of negotiations and share best practices information with their membership.

Consider taking a risk-management perspective on license agreements, identifying best-of-breed contract clauses and fitting them to your own risk profile. This will result in a baseline master-licensing agreement with which to enter vendor negotiations. The objective is to move control of the contract from the vendor to your company, where it belongs.

Remember, renegotiations provide the opportunity to improve relationships with your vendor, resolve issues that arose under the original contract, and expand its scope to meet important new requirements. Strong preparation and the awareness of your options, with the aid of a knowledgeable software attorney, can lead to a significantly better agreement.

-- Brooks Colburn and Phil Rosch

Brooks Colburn, TAC Thought Leader, has more than 20 years' experience in negotiation and corporate communication at billion-dollar companies. He created training programs in negotiation strategy and techniques for the world's largest information-technology services business, as well as for medium and smaller companies, and has taught them across the United States, Europe, Japan, and China.

Phil Rosch, TAC Expert, has more than 36 years of IT experience in virtually all IT disciplines, complemented by five years of analysis and best-practices consulting for Giga Information Group. He brings a practitioner's perspective with significant and varied experience in IT "archi-torture" and standards, metrics, operations, technical support, and in all aspects of security, policy development, organizational metrics, and risk management.

Beth Cohen, TAC Thought Leader, has more than 20 years of experience building strong IT delivery organizations from both the user and vendor perspectives. Having worked as a technologist for BBN, the company that literally invented the Internet, she not only knows where technology is today but where it's heading in the future.

Steve Hoffman has more than 18 years' experience as a software engineer, architect, and director of application development. His industry experience ranges from image and signal processing and AI-based pattern recognition to insurance, E-commerce, brokerage, and hospitality. His specific areas of expertise include enterprise application development and integration, middleware, and portals.