How to Negotiate Software Agreements

Let's face it: Getting to the point of signing an agreement for a new order management, warehouse management or website system requires a massive amount of work and time.

The systems research and selection process can take four months or longer. In fact, by the time buyers have gone through defining all of the user requirements, writing an RFP and assessing the proposals, watching vendor demos, negotiating price and other points and making a final selection, they're often so fatigued that they enter the crucial, clinch-the-deal stage with a dangerous, “Let's just get this agreement signed” mindset.

But buyer fatigue is just a small part of the problem when it comes to ensuring a project's success. A root cause of failures is focusing too much on “negotiation,” in the sense of simply trying to get a price cut or better deal. Many merchants don't put enough emphasis on thoroughly researching user needs, internal planning, understanding the vendor's and buyer's responsibilities, estimating total cost of ownership, and reviewing agreement specifics prior to signing.

After a successful vendor search, companies often fail to follow through with an agreement that's equally detailed and thought-out. How can you avoid such pitfalls?

Before I go further, keep in mind these two critical points. First, the information in this article should in no way be construed as legal advice. Consult a qualified, intellectual property (IP) attorney for that purpose.

Second, I have great respect for the many honest and reputable vendors supplying solutions in these spaces. They are crucial to our industry and continue to bring innovative applications to the multichannel marketplace.

That said, here are some points that you may want to consider as background and discuss with your counsel.