Standardizing software licence agreements can mitigate legal and commercial risk and reduce friction between teams. How do you do it?
This deep dive explores who is affected by software licence agreements, why businesses might choose to standardize them and the benefits of doing so. Use the navigation below to find out more, or take a look at our deep dives on other contracts, like MSAs and SaaS agreements.
What’s a software licence agreement?
A software licence agreement determines the rights of a business or individual to use software that legally belongs to someone else. With software licence agreements, businesses can strengthen commercial relationships and power growth, all while controlling software use and protecting its legal ownership.
The terms ‘software licence agreements’ and ‘software-as-a-service (SaaS) agreements’ are often used interchangeably – but there’s a slight difference. SaaS agreements give users permission to access software that lives on a central cloud server. Users access this software from their own devices, but can’t manage, copy or change the software itself. This is becoming increasingly popular with the rise of SaaS businesses, but traditionally, software was offered under a licence so users could install copies of the software on their devices – software licence agreements managed the use of that licence.
Who do software licence agreements affect?
The people and teams affected by this type of contract vary depending on the company. They usually include:
Sales, who often act as the bridge of communication between the business’ stakeholders and the prospective customer. They’re also the ones under pressure to close deals faster.
Legal counsel, who are responsible for reviewing the terms during negotiations and approving changes to standard positions.
Approvers, who are usually different teams across the business – such as finance, sales and sometimes even C-suite – depending on the value and impact of the agreement.
Authorized signatories, who vary from company to company.
Customers, who are the ones that will negotiate and eventually sign to use the software, according to the terms in the agreement.
Why standardize software licence agreements?
Software licence agreements can be highly complex; the contract often needs to be drafted in a certain way that meets the requirements of law before it can be classified as a valid licence. And if your business’s software licence agreements aren’t standardized, then there’s a risk that salespeople might send out contracts that include unapproved or outdated terms.
Software licence agreements are the foundation of your future commercial relationship with the customer, and can lead to repeat business over years to come
It’s all about being careful in the wording. The business is exposed to a world of potential problems if contract creators are freestyling terms and deviating from standard positions. Plus, there’s the issue of offering exclusivity in the licence: if sales gets the information wrong, it could lead to significant legal and commercial risk.
Software licence agreements are often a key touchpoint between your business and the counterparty. It is the foundation of your future commercial relationship and can lead to repeat business over years to come. But if the document itself is long, complex and unfriendly, packed with legal jargon, it can cause problems that lead to a bad customer experience and a lower probability of signing.
Standardizing these documents can improve the contract workflow, reducing time-to-sign and delivering a strong, engaging customer experience.
Experts explore every stage of the contract lifecycle in the ‘Modern contract handbook’. Download for free.
How to standardize software licence agreements
When creating a standard template that will serve all future software licence agreements, make sure you do the following:
Focus on the ‘why’
What’s the purpose of this agreement in the first place? It’s important to remember the ‘why’. Software licence agreements exist to help your business manage usage of your software. They also set the tone for the relationship between you and your customer; deliver a positive experience and increase the chance of repeat business.
Know where to flex – and codify it
There will be legal provisions in the software licence agreement that you’re not willing to flex on, under any circumstances. It’s in any business’s interest to bend on as few terms as possible. But if a certain term is always negotiated and conceded, is it worth softening up your stance on that term to help close deals faster? Legal should define your flexible terms in an accessible, understandable playbook. If this playbook is robust and well socialized, legal can empower commercial colleagues to negotiate contracts without their involvement. This gives legal visibility and approval rights without adding friction – the perfect balance of control and flexibility.
Contracts don’t have to look boring. If software licence agreements are key in your transaction with a customer, then make sure they reinforce your company branding
Remember legal design
Legal design is more than just a buzzword: it’s now the reality at forward-thinking companies around the world. When you’re standardizing your software licence agreements, focus on the experience your end user will have when accessing, reading and trying to understand the document – and think about what impact this might have on your commercial relationship. Design your software licence agreement with the user in mind.
Contracts don’t have to look boring. If software licence agreements are a key component in your transaction with a potential customer, then make sure they reinforce your company branding. Use a contract collaboration platform that allows you to add logos, images, graphs, GIFs and more with a dynamic editor. That way you can create contracts that stand out from the crowd.
When it comes to contract standardization, these features are a must-have:
Approval workflow. Defining roles for legal and signatories can prevent deviation from standard contract terms. The best approval workflows are ‘sequential triggered’, so multiple approvers are notified when their input is needed.
Internal commenting. Internal stakeholders can discuss and collaborate in real time on the contract without having to worry about audit trails, email chains and version control – ideal when standard terms need to be changed.
Tagging by value. Contracts above a certain value might have more flex to deviate from standard terms. A contract collaboration platform that allows you to tag your agreements with metadata, such as value, will make it easier for teams to store and manage these important documents. Sort your contracts, in a custom dashboard, and you’ve got what you need in just a few clicks.
Get in touch
Is managing software licence agreements a pain point for your business? Is your contract process out of control as the business continues to scale, with friction between teams, multiple systems, and a lack of visibility? If so, try Juro and enable your business to agree and manage contracts in a unified workspace.