3 Approaches to Software Procurement

Sunday, 8 October, 2017

Navigating the complexities of software contracts has become increasingly challenging in today’s business landscape. As software solutions advance and evolve, licensing models and terms have grown more intricate, making it daunting for organizations to stay in compliance during the software procurement process. Software contracts have increasingly become more complex and require more expertise to stay in compliance, complicating the software procurement process. This is due to several factors:

Complexity of Software

As software solutions become more advanced and feature-rich, the licensing models and terms have also grown more intricate. Vendors offer various licensing options, such as perpetual licenses, subscription-based licenses, concurrent licenses, and user-based licenses, each with its own set of terms and conditions. Understanding and interpreting these complex licensing structures can be daunting for organizations.

Evolving Technology Landscape

The rapid pace of technological advancements often outpaces the development of software license agreements. New technologies, such as virtualization, cloud computing, containerization, and IoT, introduce novel deployment scenarios that may not align neatly with traditional licensing models. This disconnect can lead to ambiguity and uncertainty in license compliance.

Vendor-Specific Terms

Different software vendors have their own unique licensing terms, making it challenging for organizations to navigate multiple contracts. Each vendor may have different metrics for counting license usage, varying rules for license transferability, and restrictions on virtualization or multi-tenancy. Managing and reconciling these diverse terms across different software solutions can be overwhelming.

Audit and Compliance Risks

Software vendors increasingly conduct license audits to ensure compliance with their licensing agreements. These audits can be complex, time-consuming, and costly, requiring organizations to provide detailed evidence of license entitlements and usage. The fear of audits and potential penalties has made license management a critical concern for organizations.

Global Operations and Regulations

Organizations with a global footprint must navigate licensing complexities across different jurisdictions, each with its own regulations and legal requirements. Translating license agreements into local languages, understanding regional data privacy laws, and complying with export control regulations add additional layers of complexity to license management.

Changing Business Needs

Organizations’ IT landscapes evolve continuously with mergers, acquisitions, divestitures, and technology upgrades. These changes impact software license requirements and necessitate contract modifications or negotiations. Managing license contracts in a dynamic business environment requires agility and a proactive approach.

Licensing Cost Optimization

Software licenses can represent a significant investment for organizations. As businesses strive to optimize costs, they must carefully manage license entitlements, avoid over-licensing or under-licensing, and explore licensing models that align with their evolving needs. Determining the most cost-effective licensing approach requires careful analysis and negotiation.

When addressing the challenges of software procurement, we believe there are three approaches:

1. The “Go It Alone” Approach

Going it alone is the cheaper option but comes with the highest risk of penalty. You purchase your software products and ongoing support and begin deployment. When you buy the software, you rely on the vendor, your judgment, and that of your IT staff to identify the products and number of licenses required. You continue to rely on your staff to ensure the software is installed in accordance with the license agreement. You may even rely on a software representative to provide you with some direction and answer questions to help with deployment. Relying on the vendor is NOT a recommended approach, as you may be paying for products and support that you do not need.

Read our case study on a customer who tried the “Go it Alone” approach and lost valuable negotiating ground costing them $2.3M.

2. Engaging a License Consultant

Many consultants will provide you with similar services as LicenseFortress sans a few key differences. At the end of the day, who is assuming the risk? You or them? What if ill-advised recommendations and lack of compliance proof land you in a sticky, entangled web of court dates, attorney fees, wasted hours away from your business, and ultimately, a big, fat licensing bill? Are you prepared to take responsibility for someone else’s recommendations? Most of our competitors are putting their clients through a crash course. They give you the “tools” and then hand you the keys to be the expert. They are letting you assume the risk and setting you up for a fatal car crash with the vendor.

3. Engaging LicenseFortress

LicenseFortress assists its customers in making the best decisions in optimizing and negotiating their licensing by managing your software contracts. As a license management service, we reduce software costs by optimizing active licensing and retiring licenses that are no longer in use. When we review your software contracts, we catalog and inventory the products and workloads across all environments: production, staging, user acceptance testing (UAT), and disaster recovery. As experts in software licensing, whether it be deployed in the cloud, virtual or physical environment, we back our services with the LicenseFortress guarantee.

Each approach needs to depend on the organization’s resources, expertise, and specific needs. Going it alone offers full control but requires in-house expertise. Engaging a license consultant brings external expertise and support. However, opting for LicenseFortress provides a specialized service for license compliance and audit defense that provides unparalleled protection.