Signing an Agreement? Read this First!

When the end of the year draws near, many companies make a final push to make those last few sales with end of the year promotions and discounts.  While some deals are a no brainer, there are other decisions you want to consider carefully.

Today we are sharing a great article from Find Accounting for those of you out there who are considering purchasing a business management system before 2014 ends.   Below are 10 things you may want to consider before entering into an ERP software licensing agreement.  We invite you to read through this list and then contact The Vested Group to see how we measure up as far as these considerations are concerned.

1. How many users can access the software?

What is meant by the term “user” can actually vary in software contracts. The most common variants are “concurrent user” and “named user” licensing models.

A named user approach entails that one user license is purchased for each individual who will access the software. A concurrent user model on the other hand allows for an unlimited number of named users and accounts, but limits the number of individuals that can be actively accessing the software at a given time.

2. How long can the software be used?

There are two standard approaches to determining the amount of time software can be used: perpetual and term-based licensing.

Most sellers of traditional on-premise ERP solutions license their software on a perpetual basis. Simply put, once you purchase the software, you can use it as long as you like.

Term-based licensing on the other hand is the standard model for software-as-a-service (SaaS) deployments. Generally, in a term based licensing agreement, use of the software will be contracted in monthly or annual intervals.

3. What functionality does the contract stipulate?

Modular ERP systems provide the benefit of being able to license just the functionality that you require.

Given the a la carte nature of the menu when it comes to ERP systems, though, you do need to make sure that that your software licensing agreement covers the particular features and functions you’re expecting to receive.In fact, it’s good practice to look beyond just your immediate needs to understand how modules which you may require later are licensed.

4. What implementation services will be provided?

Implementing ERP software is complex. In most situations, the software seller will need to provide at least some of the implementation services. When using a software provider for implementation services, the contract will need to not only precisely define the scope of work, but it should document:

• Support member roles and/or qualifications,
• Implementation deadlines,
• Expected or maximum labor hours (especially for hourly billing situations),
• A designation of whether the work will be completed remotely or on-site, and
• Expectations about your responsibilities in the process.

5. What support is included?

Your need for support is unlikely to end after the implementation. Because of the complexity of ERP software, users will inevitably have questions when they run into jams and bugs will happen from time-to-time. The software licensing agreement needs to adequately ensure you’ll be receiving the level of support you expect. (Feel free to check out The Vested Group’s support offering, inVESTED.)

6. What are your rights to software version updates?

Software version updates - they’re kind of like vitamins of the software world. You know they’re good for you, but you don’t always remember them. It’s generally a best practice to stay current with software updates—not only to access new features, but in order to get bug fixes and security patches. Especially when you’re dealing with software that handles data as sensitive as what is held in an ERP solution, maintaining the strongest possible security profile against known threats is critical.

7. Can you access the source code?

Some sellers of proprietary software really don’t want to share their source code with you. Some software providers will make their source code available to you for an additional cost, for various reasons.  Either way, if this is something important to your organization, make sure you clarify the source code availbility. 

8. Are there any usage related fees?

For many types of SaaS applications—including ERP options, there is a growing trend toward usage related pricing models. In usage based models, your pricing tier may be determined by your bandwidth or data storage consumption, for example.

But consumption of network resources isn’t the only usage metric which SaaS providers use when determining pricing. While it’s less common in full-fledged ERP systems, many task-specific applications will assign costs related to creating new records in the system.

9. What are your rights to the data?

Another software licensing issue that is particularly relevant for SaaS buyers is data ownership. In an InformationWeek.com study, 31% of the survey takers who had not adopted SaaS solutions indicated that concerns over data ownership were one of the reasons for their reluctance.

In fact, at some point, generally every software buyer generally will ask their SaaS vendor: “I understand I’m essentially renting the use of software, but do I still own the data?

The easy answer to the question is yes—in the sense that any reputable SaaS based ERP solution will allow for data export of records. The software license agreement will specify this capability.

But don’t overestimate the scope of this licensing language. Not every program’s export features are equally robust. Sure, with any program, you’ll be able to export things like invoice data showing customer numbers, invoice dollar amounts, line items and so on. But what if you’ve established complicated conditional business logic for approvals processes in your supply chain management? It’s considerably less likely this sort of settings and permissions oriented data will be transferable.

10. What happens when you want to buy more?

Things change. It’s a simple fact of life.

When it comes to your ERP software needs, it’s easy to predict that you’re likely to eventually need to increase or decrease: User counts, access to different functional areas, or the level of support you’re receiving. It’s important to find out what your licensing agreement says about pricing related to these changes.

Are you ready to take advantage of year-end promotional pricing on an ERP system for your organization? The Vested Group is here to help! We are a certified NetSuite Solutions Provider as well as a recent NetSuite 5-Star Award winner.  We have an experienced team of NetSuite consultants that can support your implementation in any way that makes sense for you– from a full-service NetSuite implementation to a guided self-implementation or anything in between.  Keep the list above handy and ask us your tough questions - contact The Vested Group today!