Best Practices: A Work Plan To Successfully Negotiating Software Contracts (Part 1 of 2)

Published on March 8, 2004 by R "Ray" Wang

In the last post we talked about 7 strategies to plan a software contract negotiation:

  1. Ensure that the right team is in place
  2. Identify the organization’s key business drivers
  3. Determine the product adoption plan
  4. Consider contract strategy implications of the software ownership life cycle
  5. Align contract strategy with product adoption
  6. Identify leverage points
  7. Prioritize key contract objectives

Here are the details to put a plan in action…

Step 1: Ensure that the right team is in place

  • Inputs:  Organizational chart and agreement on key roles.
  • Action items: Determine the key roles needed to conduct the negotiation. Business teams include the COO, Division VP’s .  Technology leaders include the CIO, enterprise architecture . Vendor management teams include the procurement experts, legal team, etc.
  • Deliverables: Responsibilities list for each role.

Step 2: Identify the organization’s key business drivers

  • Inputs: Ranked list of business priorities.  If not available, interview key stakeholders to determine organization’s business plans and priorities.
  • Action items: Rank the key priorities. Use the business driver chart to determine the organizations emphasis (compliance, efficiency, growth, or strategic).
  • Deliverables: Validation or creation and validation of a prioritized list of business priorities

Step 3: Determine the product adoption plan

  • Inputs: Implementation road map.
  • Action items: Review the implementation plans. Assess for realistic time frames. Review new product road map strategy with client.
  • Deliverables: Product strategy review of vendor X’s product. Validation of existing implementation time frames and future adoption plans.

Step 4: Consider contract strategy implications of the ownership life cycle

  • Inputs: Existing contracts.  Order documents
  • Action items: Determine user based metrics and actual usage .  Determine usage based metrics and actual usage.  Compare cost per unit with known ranges Review vendor’s licensing and pricing policies .  Compare terms and conditions
  • Deliverables: Red lined contracts with suggested improvements in terms and conditions Pricing comparison spreadsheet Cost savings opportunity calculator

Stay tuned for Part 2 next week!

Contact me at rwjhu@yahoo.com if you need any assistance in your contract negotiation.  We provide fixed fee pricing, retainer models, or gain sharing for Baan, JD Edwards, Lawson, Microsoft Great Plains, Oracle, Peopelsoft, SAP, And Siebel contracts.  Just ask!

Copyright © 2004 R “Ray” Wang. All rights reserved.

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