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Before You Sign: Important Questions to Ask When Negotiating Software License Agreements

Ron Avignone
Ron Avignone
Updated Aug 09, 2022

Some critical questions to ask before you choose which software vendor best fits your business needs.

When searching for software or cloud vendors, asking the right questions will help you help make an objective comparison between your options.

Begin your qualification process early.

Use these key questions to poke and prod at your short list of vendors—and then listen very carefully to their answers.

Here are some great suggestions for beginning negotiations:

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1.  What happens if our companies have a disagreement about roles and responsibilities?

What is your dispute resolution process? Does it include an arbitration clause in your Software License Agreements, or will we have to pursue litigation as our only recourse? What is your track record with respect to litigation and customers? How many customers have sued your company, and what were the outcomes? Did these disputes go to court? How were they settled, and what were the details?

2. What if my company wants to purchase optional modules and additional licenses in the future?

Will you lock in the price today so I can better estimate the total cost of ownership of your product in the future?

3.  What other modules are available today that we may use later?

Will you guarantee in writing that these modules will be available in the future?

4.  As we grow in using your product, can we set up independent service desks/databases within our company for different functional areas or departments?

For example, could the Human Resources Department have their own service desk/database in your application that is private and segregated from other departments? Can this service desk share a single database of underlying users/customers so that this database does not have to be replicated multiple times? Are there additional costs for this capability?

5.  What are your license options as my company grows?

Today, we may purchase “Named/Dedicated” licenses; but as we grow, we may want to have people use the application on a part-time basis. What are all your license options? Can we share licenses across Asia, Europe, and the USA so that we do not have to buy licenses for each geographic region, since they operate in different time zones with only minor overlap?

6.  Do you have customer case studies that discuss business results that you have helped your customers achieve?

Can I speak with these folks to learn firsthand of their experience using your product?

7.  How will you obtain my company’s evolving feature requirements after I became a customer?

Will you regularly call me for feedback and consider our feedback into your development plans? Will we be able to open product enhancement suggestions in a database and see them tracked through implementation? Are there any charges for making product enhancement suggestions that are implemented?

8.  Will I have an account manager who is compensated based upon retaining my company’s business?

Will I have “one neck to squeeze,” or will you make me navigate your company and seek out appropriate resources?

9.  Will you provide a 30-day supported trial of your product without obligation?

10.  How often will your company provide new feature and enhancement releases?

Is this included in the annual software maintenance fee?

11. After my company pays for your software licenses, what if we become dissatisfied for any reason?

Perhaps the product does not work as demonstrated or promised. What will you do?

12. What if better technology comes along after we purchase your software licenses?

Perhaps your company is not keeping up with evolving industry standard enhancements. Are we required to use your software licenses through to the end of the term, or can we trade them in and receive a pro rata cash refund to purchase a product that meets our evolving needs?

13. How quickly can we be up and running on your product?

Does it work “out of the box”? Will it take a week, a month, a quarter or six months or longer to deploy? Will you provide an implementation plan in writing and commit to it? Who will initially pay for set-up, customization and configuration costs? Who will pay these costs on an ongoing basis? Do we need to learn a programming language to administer and customize your product? If so, what is the approximate size of the developer community, and what is the average hourly rate?

14. Please prepare an estimated total cost of ownership (TCO) of your product over four years.

Consider all the acquisition and lifetime costs of ownership. Document all your assumptions and we will provide you with our assumptions for the analysis, as needed. How does your product TCO compare with the other companies we are evaluating? Are training, set-up, customization, configuration, support, integration and any usage fees all included in this TCO?

Clearly you have a lot of questions to ask before choosing your software or cloud vendor, but this stage in the negotiation process is key for ensuring that you make a smart decision for your company. Don’t be shy and don’t hold back—the right vendor will be able to answer your questions with ease, and you can move forward with securing the services that you need.

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Ron Avignone
Ron Avignone
Ron Avignone founded Giva in 1999 and is based in Silicon Valley, California, serving customers worldwide. Giva was among the first to provide a suite of help desk and customer service/call center applications architected for the cloud. Ron holds an MBA from the University of Chicago and is a New York State Certified Public Accountant with a minor in English. Ron is also an avid endurance sportsman, vegan and mindfulness advocate.