Scrutinize Your Multichannel Software Contracts
It’s amazing how many companies don’t look very closely at software license agreements. These are legal documents, and without close review of payment terms, deliverables, schedules, termination options and other key details, you could be putting your company at risk of losing thousands of dollars.
To protect yourself and your company’s interests, don’t rush into signing an agreement just because the vendor is giving you a soon-to-expire discount. Getting to a fair agreement for both parties takes time, negotiation and a careful review of any contract. (A quick disclaimer: The focus of this article is to alert you of some of the items you’ll encounter in software agreements; it’s not to be taken as legal advice.)
As part of your software selection process, you probably submitted a request for proposal (RFP) listing your detailed requirements. From vendor responses to the RFP and other due diligence you made your selection. The selected vendor’s response to your RFP should become an addendum to the vendor’s agreement.
Most software vendor license agreement terms are very favorable toward the vendor. Most vendors like you to sign the agreement, then work on the details of defining the implementation schedule and costs, modifications, training, and so on. Once you sign the agreement, you’re bound by the terms, regardless of what the vendor may have told you verbally. All terms that you negotiate need to be written into the agreement. Any other representation, written or verbal, isn’t an addendum to the agreement, and thus unenforceable.
One of the most important aspects of software licenses is the payment schedule — how much and when. Don’t pay for everything until the system is installed, your staff is trained, you’ve converted from your existing system, and you’ve successfully tested and balanced the system and all interfaces to other applications and/or service bureaus before the “go-live” date. Payment terms should be realistic: While the vendor might like 100 percent payment at the time of signing, this isn’t realistic for your company. A schedule that represents good faith and payment for milestone delivery is best. For example, try a payment plan that calls for 50 percent at the time of signing, 20 percent at installation, another 20 percent after acceptance testing, another 5 percent after “go-live” and the last 5 percent 30 days after “go-live.” You want to have some leverage should there be any issues along the way.