W:
www.universitybusiness.co.uk | T: @UB_UK
database from your software engine). Finally, the team should ideally
include a legal expert with experience of what is and isn’t standard, what can and can’t be negotiated and to advise on the legal basis for the intellectual property licensing.
Understand the requirement The first step for the team – and one which should be taken well in advance of approaching the market – is to understand the current and likely future business and user requirements over an agreed investment period. This is where an expert team of procurement and IT professionals really add value, to avoid simply translating the status quo (in the form of the current solution) into the requirement and ensuring that the institution drills down into the true business and/or user requirement. The joint team should also ensure that the purchase is future proofed in terms of likely evolving needs over the next few years. Armed with this information market
testing should become a focused and straightforward task, although inevitably it will throw up further questions which will need to be tested and discussed.
Understand the licence terms It is also vitally important to study and understand the implications of the licence terms. This is not always as simple as it sounds. Nearly all the major software providers adopt a similar approach here, with standard terms full of footnotes and small print or, quite simply, incomprehensible. A lot of this is down to the use of technical jargon and the fact that different components of the system may be based on different licensing criteria. By way of example, production licences are sometimes ‘bundled’ with a certain number of ‘free’ non-production licences and so questions and issues can arise over the number of software instances on non-production environments or where physical servers have been converted to virtual servers. Experienced procurement teams will
be familiar with the concept of named and concurrent users (although it’s always wise to check and, if necessary, clarify the precise definition, particularly in the case of concurrent users) but often the combination of two components (say, an SAP module operating on an Oracle database) can make this the kind of minefield that makes comparing mobile phone charges look like child’s play.
Negotiate The third step is to negotiate with the vendor. Whilst this needs to be done in accordance with the procurement rules, many purchasers assume suppliers will not agree to vary their standard terms. This is far from true. Most suppliers will extend the licence to third-party “supply chain” users, agree temporary cover for mergers and dispositions and look at disaster recovery solutions, often at no extra cost. Support terms too can usually be amended to provide the customer with clear service levels and effective remedies if the supplier fails to meet them. These agreed variations are usually documented in an annexe to the licence terms, signed off by both parties. It is also possible, subject to the procurement rules, to build-in change mechanisms to permit changes to the contract during its life. Using expert legal advice to negotiate and document the deal will almost always pay for itself over the life of the investment.
The whole deal The final step is to understand the package as a whole from a financial point of view. The basic cost of the licences is only one component of the total cost of the system. The cost of ongoing support is often a much larger component and one which often gets overlooked. This, too, can be negotiated. The aim should be for the purchaser to understand as closely as possible the total cost of ownership over the investment period. Tying the provider in to fixed annual support costs or capping periodic increases is the obvious way to achieve this, as is agreeing in advance the costs of scaling up the system, for example, by purchasing additional components or licences. This is where an initial understanding of potential future requirements for scalability will pay dividends.
Sue Malthouse
Be prepared And if the worst comes to the worst and you are unlucky enough to be audited? Maintaining clear
SUE MALTHOUSE IS A PARTNER AT LEADING
EDUCATION LAW FIRM VEALE WASBROUGH VIZARDS.
SUE CAN BE CONTACTED ON 020 7665 0915 OR VIA
smalthouse@vwv.co.uk.
demonstrate to the supplier that you take the licensing issues seriously. If you do receive notification of non-
compliance, it always pays to interrogate the basis of the allegations to make sure that the supplier has got it right. It is also worth bearing in mind that audits (like sales) are driven by targets, with auditors taking an increasingly aggressive position with the approach of target deadlines in an ongoing difficult market. Symptomatic of this phase is the issuing of deadlines and threats to involve the legal team. Conversely, this phase may also provide an opportunity for compromise as the supplier will be keen to book revenue before the target deadline expires. Never be afraid to escalate the mater
within the supplier organisation if you feel that their approach is unreasonable. Senior relationship managers are usually keen to protect the commercial relationship and will take a longer view. Finally, you may also want to take
the opportunity to consider your future requirements when striking a deal. The supplier may not be willing to discount the remedial licence but may well offer favourable terms for future purchases if it means securing the long-term relationship. UB
and up-to-date records of your licensing terms and usage will help you both avoid panic and
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