How to negotiate a software licence agreement

Software licence agreements have a big impact on commercial growth. How can you make negotiation frictionless to get to “yes” faster?

We take a deep dive into who software licence agreements affect, how parties may negotiate them and ways to streamline this process. Use our navigation below, or explore our deep dives on other contracts, like MSAs.

What's a software licence agreement? | Who do they affect? | How to approach software licence agreement negotiations | How to make software licence agreement negotiations easier | Useful features | Learn more

What’s a software licence agreement?

A software licence agreement gives an individual or business the right to use software that legally belongs to someone else. These agreements allow the licensor to control how its software is used, as well as helping to protect legal ownership and strengthen commercial relationships between the parties.

Software licence agreements are often confused with software-as-a-service (SaaS) agreements. The terms are used interchangeably, but there’s a subtle difference: traditionally, software was offered under a licence and not delivered as a service. Now, SaaS businesses are growing in popularity, and software is offered as a service from a central location. It can be accessed by different users, but the business still runs the software. 

Some companies may use a master services agreement (MSA), which issues a contractual right to use the service as part of a broader framework for the relationship. Find out more in our deep dives on MSAs.

Who do software licence agreements affect?

The people affected by the software licence agreement workflow will vary depending on the business. Usually, they include: 

  • The sales team, who sends the contract to the prospective customer and acts as a bridge of communication between legal and the counterparty.

  • Legal counsel, who review commercial terms and approve any suggestions made in negotiations.

  • Approvers, who can be from different teams in the business – such as finance or sales.

  • Customers, who negotiate terms within the contract and are signing up to use the software.

  • Authorized signatories, who differ from business to business.

Experts explore every stage of the contract lifecycle in the ‘Modern contract handbook’. Download for free now. 

How to approach software licence agreement negotiations

There is a spectrum of negotiation for all contracts, with minimal to low negotiation at one end, and extremely heavy negotiation at the other.

At the furthest point of low negotiation on this spectrum are contracts like NDAs, which aren’t usually negotiated at all. Legal teams often choose to automate these contracts because the risks involved in letting commercial colleagues create their own NDAs are relatively low. 

At the other end of the scale are high-value contracts, such as those governing a merger or acquisition. These contracts aren’t likely to become part of an automated workflow; they’re usually negotiated face-to-face, or over Zoom, with the process taking several months or even years before it’s finalized with a signature. 

As a business, being resolute with the positions in your software licence agreements has the benefit of simplifying the negotiation workflow and minimizing risk

Software licence agreements fall somewhere in the middle – but it depends on the business, the counterparty and the type of software. Generally, these agreements are closer to the low-negotiation end. And, as a business, being resolute with the positions in your software licence agreements has the benefit of keeping negotiation simple and minimizing risk.

B2C companies don’t usually negotiate software licence agreements, due to the volume of contracts and imbalances in the power dynamic. Think back to the last time you read through the Ts and Cs of your Microsoft Office licence! Negotiating with such a massive corporation is even more out of the question for an individual, but B2B companies can be more flexible and may deviate from standard terms to get deals over the line. 

The most frequently queried or negotiated terms and queries include:

  • Licensing provisions

  • Duration of licence

  • Termination rights

  • Liability provisions

  • Territories –  that is, where you can use the licence

  • Misuse provisions – what constitutes as misuse of the licence

Which of these you’re willing to flex on is ultimately the legal team’s decision, but you can make the process of negotiation easier for everyone involved with a collaborative, digital, self-serve workflow.

How to make software licence agreement negotiations easier

Software licence agreements that are created, managed and agreed across several different systems can lead to serious risks, as changes (and the audit trails behind them) don’t survive the transition between systems. When your process involves Word, PDF, email and DocuSign, alongside messaging apps, platforms like Slack and the occasional phone call, it’s hard – if not impossible – to keep track. 

An automated workflow, with legal defining the template and approving negotiated changes, is much safer and more efficient. 

If commercial colleagues change terms in Salesforce and this change isn’t reflected in your contract platform, then forecasting will run into trouble – particularly if the CFO and general counsel rely on different sources of information

Playbooks allow you to establish fallback commercial positions that you’re happy to accept in your software licence agreements. If these playbooks are robust, accessible and well socialized, legal teams can empower sales to negotiate in a contract collaboration platform without needing to get involved. This gives legal counsel visibility and approval rights without adding friction.

Two-way integrations between your contract collaboration platform and your business’s CRM help to ensure that information is up to date and accurate. If commercial colleagues change terms in Salesforce, for example, and this change isn’t reflected in your contract platform, then forecasting will immediately run into trouble – particularly if the CFO and general counsel rely on different sources of information. Similarly, version control issues between both systems can cause frustration and uncertainty, and ultimately waste time for everyone involved. 

Useful features 

If you’re looking for software that can help you simplify negotiations, look out for the following features:

  • Internal and external commenting. Discuss internally with colleagues, and collaborate externally with the counterparty, without having to leave your browser.

  • Visual timeline and audit trail. Get a complete overview of changes to the contract, counterparty activity, and previous versions with just a few clicks.

  • Full OCR text search. Software licence agreements can get lengthy. Save time searching for key information with full OCR text search functionality.

  • Automated reminders. Never miss a renewal date again – automated reminders keep you ahead of the game.

  • Two-way integration with CRM. Make sure sales and legal data is always in sync across platforms.

  • Slack and email integrations. Notifications via Slack and email keep you in the loop as negotiations take place.

By supercharging your contract workflow with all these features, you can enable the wider business to collaborate better on software licence agreements, keeping things friction free and helping you close faster.

Close deals faster with Juro

Is negotiating software licence agreements a pain point for your company? Is your business scaling so fast that the contract process feels out of control? If so, try Juro and discover a contract collaboration platform that simplifies negotiations, reduces time-to-sign and helps teams manage contracts in a unified workspace.

 

Topics: Software licence agreement

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