Gartner: Negotiate CRM licensing terms carefully

Companies have to live with the terms and conditions struck in a CRM license agreement for many years, so due diligence is key.

That's the point analyst Jane Disbrow makes in a Gartner Inc. research report published last week, "Ten CRM License Agreement Issues Worth Negotiating."

Disbrow, a research director at Gartner, details 10 issues that companies should address before sealing any CRM software deal. "Remember that a software vendor's contracts protect the vendor, not you," she warns.

Broad usage rights are critical. Make sure they include a parent organization and subsidiaries or affiliates, Disbrow wrote. Include the right to transfer licenses in case of a merger, acquisition or divestiture, she says.

When establishing pricing metrics such as "concurrent user" and "named user," be specific. Prices based on financial metrics such as revenue or budget are especially risky, Disbrow says. If they can't be avoided, clearly define what will be included and excluded. For example, Disbrow says, what happens if a one-time event spikes a company's revenue higher, but for only one year?

Certain customer changes should be covered without fees. Companies should be able to change the location of the software or transfer it to another vendor-supported hardware platform, operating system or database, without penalty, Disbrow says.

Additional issues that Disbrow tackles include setting terms for replacing functionality; defining a vendor's conformance with documentation; establishing vendor audit rights; incorporating sales documents into the final agreement; and negotiating a long-term cap on maintenance increases.

To see the full report, go to Gartner's Web site at www.gartner.com. Disbrow's licensing report can be found among the firm's CRM focus area research. For non-Gartner clients, the report costs US$95.

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