7 Mistakes When Renewing Software Support Licenses

7 mistakes organizations make in renewing software support licenses:

Every year, software vendors send you a bill for support.  In many organizations, the bill gets paid automatically without review. Watch out!  Not reviewing the licensing and support bill may be costly or, worse yet, you might be out of compliance with the licensing terms.

1.      Not Knowing What You Own: Do you even know what each license does and if you need it?  Software companies often add functionality to their software with each new release. Sometimes this means licenses are obsolete, yet they still appear on your support bill.  Software companies may change or add licensing options that might meet your needs at a lower cost point.  So do your homework.  Find out what you own, what it does, and compare it to what you need.

IBM Cognos Clients: If you are an IBM Cognos client, Lodestar will provide a free licensing review once per year.

2.      Not checking with the business users to see if they have the right quantity and types of licenses: We recommend you do an audit at least once per year to ensure your company is not using more licenses than it owns.  Many software vendors have eliminated the license keys that provided warning messages when you add users in excess of your legally authorized number.   So it’s up to you to police yourself and make sure you are not violating your contracts with the vendor, as most reserve the right to audit you.

IBM Cognos Clients:  According to IBM licensing rules, you need to have a license for any consultant who will have access to your system.  The cost of non-compliance in an audit can be severe.  The cost of purchasing the licenses required, retroactive support and penalty fees will be assessed by IBM and are not eligible for any discounts.  See our blog on preparing for an audit. https://lodestarsolutions.com/lodestar/?p=2649

 3.      Not asking if there is a better licensing model to meet your needs: Software vendors periodically change their licensing models.  The latest trend by software companies is toward simplifying licensing. (APPLAUSE).  So ask your Partner or Software vendor if you are on a licensing model optimized for your needs. There is usually a trade up or migration path to other licensing models.

IBM Cognos Clients: IBM recently announced a new simplified licensing model, but at this time it is not advantageous for clients to migrate to the new model.  However, if you currently have a large number of “authorized users” (in excess of 500) you might want to explore moving to a PVU model.  Lodestar has helped many clients migrate their licenses, resulting in more functionality, more users, and a lower price.

 4.      Not comparing current quote to what was paid last year.  This should be a no brainer, but you would be surprised how many organizations just process payment.  Review your invoice in comparison to the prior year’s bill.  Look to see how substantial the increase is, and if it seems high, negotiate it!

IBM Cognos Clients: Lodestar Solutions can help get the increase down to a tolerable amount.  Contact renewals@lodestarsolutions.com for a quote.

5.      Not Negotiating or Realizing there is a “NOT TO EXCEED” Price Protection on Support: When you make a substantial purchase in software, you should consider asking for an addendum or provision in the contract that protects you from future price increases in S&S and clarifies what price you will pay.  This is called a “Not to Exceed” Provision, or NTE.  If you are not about to purchase software but received a renewal bill, check with the person who was involved in the original deal purchase to see if there is an active NTE provision.  Often, software companies and third party partners will issue invoices not realizing there is an NTE.   Many times, your procurement or accounting offices are not aware of the agreement terms.  This type of document can save you thousands upon thousands of dollars.

IBM Cognos Clients: If you are about to purchase a large number of licenses with an NTE, and you are working with a partner like Lodestar, make certain the addendum does not restrict you from buying future year’s support from the partner.  IBM has two forms of the NTE so make sure you get the partner friendly one, as the partner may pass on additional savings on to you.

6.      Not checking state sales tax laws to see if  your Software support renewal licenses should be taxed:  Many vendors just charge state sales tax on software and support without considering the unique laws of the state.  With the states constantly looking for revenue, vendors error on the cautious side, but this can cost you.  Most states apply the same rules to support renewal as they do to the software purchase.   Some states have a download only exemption from Sales Tax, even for canned software; GA and FL are a few, but watch out!  You should have the correct paperwork on file to protect yourself in the case of a sales tax or use tax audit.   Find out your state laws from the taxing authority.

IBM Cognos Clients: Lodestar can provide you with a form to complete and file with IBM to clarify you only allow downloadable software.  This will protect you if you are in a “download only” state.

7.      Not getting a quote from a value added reseller: Software vendors typically have a huge reselling partner network.  Resellers are often more knowledgeable about licensing and software functionality than the software vendors’ support renewal representatives, so they can help ensure that your licensing meets your needs.  But the most important thing is that they can sell it cheaper than the software vendor by simply giving up a little of the margin they receive for selling support.

IBM Cognos Clients: For a competitive quote on your IBM Support Renewal, or to consolidate multiple IBM Support bills into one, contact renewals@lodestarsolutions.com.

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