Negotiating Enterprise License Agreements – How to Use a Fact-based Forecast to Improve Results

By Robert Froelich, SoftwareONE

Among software asset managers, we are all certainly very familiar with the concept of the enterprise license agreement (ELA). All of the major publishers offer an option for a master contract with a set of commitments that is promised to greatly streamline how we transact for software. It is certainly convenient for organizations to only have to deal with adding software once every year or so. The publishers entice us with deep discounts and special bundles to make these offers attractive. We are often reminded how it will help us to easily adopt the latest and greatest versions of the technologies they offer.

There are certainly many obvious benefits to the enterprise license agreement. However, it’s important to ask ourselves why publisher sales reps are so eager to get us to sign up for new agreements that encompass increasing amounts of our total software estate. We have to carefully consider, what’s in it for them, the publisher sales rep and the software publisher. There is another side to these agreements that present unique challenges to those of us whose job it is to efficiently manage company resources.

ELA Challenges

First and foremost, enterprise license agreements incent organizations to buy more of the publisher’s software. They are often designed with a view toward future use and a component of forecasted growth. Those terms we all know are designed to get us to buy more and commit now if we want the publisher’s most favorable pricing and terms. The sales rep captures all of that credit for quota achievement and commissions up front, with fewer transactions to manage, but are our needs really better served by the big deal?

Once we are committed to the licenses, it is very difficult to remove software that we no longer using or using less of. These programs usually lock in committed discounts only in one way; assuming greater quantities or a greater number of products. If we want to decrease quantities or eliminate a product, we risk losing our discount or at least being forced to wait until expiration of the current contract. Since these contracts are typically negotiated at a very high management level, it is very common for specific requirements for departments and business units to not be fully met in the agreement. This leaves us with the situation where we own a large quantity of licenses, but some groups are still forced to go out on their own and negotiate side agreements to meet specific business needs. Finally, while the discounts look impressive on the face the deal, there are often requirements to add in products or services we don’t have a requirement for.

Traditional SAM Doesn’t Help

SAM, as we traditionally think of it, doesn’t really help very much in these situations. The data we gather is very good at telling us where we are over-licensed and under-licensed. This traditional compliance approach to SAM, while useful for objectively measuring the problems associated with some Enterprise License Agreements, is not very helpful at solving the problem since we can’t easily modify the licenses or quantities included in an ELA, especially if we find that we are over-licensed.

What we really need to do is identify ways that we can avoid agreements that put our license position far ahead of need – avoid where we assume costs for both license and potentially years of maintenance before we ever have an opportunity to derive value from those assets. SAM can help us to capture what our organization is actually using, which makes annualized true-up a lot easier, but it also provides a valuable source of data that we can mine over time and use for other purposes outside of our traditional SAM processes.

SAM Data and Negotiations

When we built our SAM program and began capturing all the data about users, desktops, servers, CPUs and cores, we probably didn’t fully appreciate the amount of useable business intelligence we could gather about our organization’s behavior, past and potentially in the future. When publisher sales reps are pursuing your organization to secure an enterprise license agreement, they are following a carefully choreographed script that allows them to build models of your environment that will look very compelling to management. That means that the opportunity is for the forward-thinking SAM practitioner to build better, more realistic models based on his or her experience with the business and superior access to actual usage data over time. Publisher reps will often know their own license terms and contract programs better than we do, because that is their business, but these details are not impossible to learn with some careful study, or by contracting with an independent licensing expert.

Therefore, our goal is to use the SAM data to approach the enterprise license agreement with our organization’s senior management accessing superior usage forecasts and models based on the detailed analysis of our own environment. By knowing what we have deployed, when it was deployed, when it will be retired, and having some insight into the plans of our key stakeholders, we can develop powerful alternatives to slickly-packaged and polished theoretical models that would otherwise influence and lead to a less than optimal enterprise license agreement. To sum up, when we are tasked with preparing for an enterprise license agreement negotiation our best weapons are to start with what we know, in detail, and project what we know based on what we know about the licenses, the trends in our business, and details of stakeholders future plans.