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CRM Software Negotiation - Whitepaper (5 of 5)

Customer Relationship Management (CRM) Software Negotiation Survival Guide

This second version advisory was written by CRM analyst Rob Kane based upon his twenty two years experience
in negotiating CRM software license agreements. The crux of the paper's approach and recommendations
focuses on achieving a fair price and advancing the vendor's cooperation, participation and vested interest.

With over 12,000 downloads, the original document has been widely cited in several industry publications and
community web sites as well as commented on by countless readers. This updated version has been enhanced to
include the new software as a service (SAAS) delivery model and the particular experiences learned thus far
from the more popular CRM SAAS vendors. This article provides no legal advice or representation.

  1. Preperation and Prerequisites
  2. Validate Decision Making Criteria
  3. Become a Preferred Customer
  4. Achieve a Fair CRM Software Price
  5. Lower Risk and Cost with Seasoned Consultants
  6. Caution with CRM Customization
  7. Improve Customer Support
  8. CRM Service Level Agreements
  9. Avoid Unexpected Changes
  10. Value Added Contingencies
  11. Summary

Finally, we provide a number of value-added recommendations which are both commonly requested by experienced negotiators and generally accommodated by software vendors.

Minimum warranty  -  The minimum warranty period should be one year from the date of acceptance or initial installation. Consideration should be given to including specific performance warranties, together with a right to terminate if the performance criteria are not fulfilled. Performance criteria, customer specifications and customer technical requirements should be specifically stated in a schedule to the agreement in order to assist in the definition of the specific performance warranties. Important dates and times should be stated and locked in with specific penalties. All fees and costs should be included. Any rights to terminate early should be clearly stated.

Disabling device  -  The vendor should warrant that the software does not contain any virus, time sensitive devise or other routine that can disable, erase or otherwise harm the software or data.

Backup copies  -  Ensure you have the right to make at least two backup copies, one for use at a primary site and the second for use at a disaster recovery site that may be owned or operated by a third party. Be sure you are entitled to use the backup copies for disaster recovery testing even when the production copy is live.

Sale of business  -  Determine if you desire the right to transfer the license to any entity who purchases all or a substantial portion of your business. If needed, no transfer fees should be owed.

Transfer of license  -  Determine if you may need the right to transfer the license to a company outsourcing service. If required, no transfer fees should be owed.

Indemnification -  Be sure the vendor indemnifies you against any claim that the software infringes any patent or copyright of any third party wherever the software is to be used. The intellectual property infringement indemnity should not be subject to any term in the contract that has the effect of limiting the vendor's liability.

Exit clause  -  Terms and conditions of an exit clause should be clearly stated. Exit clauses may have the effect of returning the application software even after the Acceptance Period.

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Good negotiation results in gaining the commitment, participation and partnership with your CRM vendor. By rising above the one-sided, boilerplate vendor software agreements, you can incorporate the supporting verbiage to lower project risk and increase the probability of implementation success and post production benefits.

This paper has not touched upon several more legally oriented topics such as dispute resolution, venue, choice of law, recoverability, confidentiality and many more legal matters. We do not provide any legal advice and strongly recommend you seek the advice of competent legal counsel for these and all matters related to the agreement or contract.

We're often asked what's the most difficult part of successful negotiation. The answer is walking away from a non-compromising vendor. The truth is that if you are a very large company, the vendor will negotiate any and every item in the agreement. You won't secure everything you want, however, you'll likely engage in meaningful dialogue and ultimately reach a compromised consensus. Unfortunately, if you're a small business or middle market organization, there are several vendors who will choose to play strong arm tactics and provide few compromises to assist you in reaching your objectives. Common sense and repeated industry experience clearly shows that if you have no bargaining power during the negotiation you'll have no voice after the sale. Walking away from a preferred vendor solution because you are unable to negotiate items which reduce risk or enhance success is a difficult, albeit correct, thing to do.

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