Software Agreements Line by Line. How to Understand & Change Software Licenses & Contracts to Fit Your Needs

4. Managing Completed Software Licenses

a. Typical Process

Organizations of all sizes commonly have no system to (1) capture important information from their completed software licenses, such as annual costs and maintenance renewal dates, (2) collect and retrieve the actual software license terms, (3) track performance issues, (4) extract knowledge from existing licensing transactions for use in future transactions. Frequently the final version of a licensing agreement remains in the hands of the employee to whom the signed agreement was delivered. Often companies cannot even find agreements more than a year after they are entered into. Should the typical company need to examine the terms of all or a group of its existing licensing agreements in connection with a software licensing audit, a sale of its business or business line, or an outsourcing - it will experience limited success in doing so-even after devoting substantial internal efforts to the cause.

The absence of a system to store and retrieve the actual agreements almost assures the inability of the organization to effectively track compliance by the vendor with the terms of the agreements and the ability to efficiently track and resolve performance issues. This is not likely as significant of a problem in instances in which an organization is simply signing standard vendor agreements, because as discussed in earlier Chapters, there are few vendor obligations and even fewer tools for the customer to meaningfully manage issues that arise included in such agreements. However, as your organization progresses in its capabilities with regard to software licensing, it is essential to have a process in place to enable ongoing evaluations of vendor performance and agreement compliance. In the absence of such a system, it can be expected that over time, hard fought agreement concessions obtained during the negotiation process will be forgotten or ignored and standard vendor practices will be reverted to in their place.

b. Process Improvement Recommendations

It is not expensive, time consuming, or complex to implement an effective process to assist your organization to effectively manage its licensing and other information technology agreements, provide a basic level of education to your business teams on critical issues, enable your company to easily retrieve agreements and amendments, and identify and mitigate risks. For example, KnowledgeGate™, the technology agreement management tool developed by the authors and the e-Business & Information Technology team at Foley & Lardner, includes an extranet based tool that provides key information dashboards (e.g. annual costs, maintenance renewal dates, vendor and company contacts), detailed data collection fields to assist in evaluating individual agreement and enterprise success in meeting "best practice" standards or identifying areas for improvement in structuring licensing agreements, links to key organizational policies affecting licensing, such as confidentiality policies, and the ability to upload agreements and amendments. You do not have to subscribe to a product like KnowledgeGate™, however, to make significant improvements in your existing processes.

To fast track improvement in your organization regarding its management of software licenses and related technology agreements you will need to:

• Appoint an individual or group to have overall responsibility for managing software license agreements throughout the enterprise (this should be the same group that has responsibility for approving such agreements as discussed above);

• Develop a mechanism for collecting, cataloging, and storing your software licenses (a filing cabinet is better than no process, however, a simple database may better serve your objectives);

• Commit resources to, at a minimum, review the agreements for key events and dates, vendor commitments, and cost and pricing agreements. Ideally, these resources could also extract information as to how the agreements your organization is actually executing compare to your established "best practice" approaches to such agreements; and

• Create a simple report card for monitoring vendor performance in key areas such as meeting implementation dates, complying with service levels, and adherence to agreement terms.

The above processes, like others discussed in this book, if implemented will assist your organization to effectively control costs, improve your corporate knowledge and capabilities in structuring license agreements, and identify and minimize business risks inherent in such transactions.