Buying Software – a Best Practice Guide

This document covers best practice for buying all types of software, whether it is on-premise or cloud-based software, perpetual or subscription licenses. For best practice information relating to purchasing cloud services (whether or not this includes the software), please see our guide to Buying and Using Cloud Services.

Beware of heavily discounted software

Some licenses to be wary of:
Home Use Licenses – are sold to private individuals for non-commercial use.
Educational Licenses – specifically for use in schools, universities and other educational institutions. They may have additional or different features to that of commercial licenses, as they have been developed with students and educators in mind. It is illegal to use these licenses in a non-educational environment.
Government, Public Sector and Charitable Licenses – are sold, usually at a discount, to the specific sector.It is illegal to use all these licenses in a business or commercial environment

While it can be tempting to buy software at a discount, you are running the risk that the software may not be legal for use in a business or commercial environment. This is because software publishers often price their software by sector, country or region, and it is important to understand exactly what the use rights are for the software you are buying before you take advantage of any discount.

Centralise and standardise software purchasing

A common challenge for businesses is that employees may buy software using either corporate or personal credit cards. This can cause several issues, not least that the software is officially owned by the employee rather than the business! The impact of allowing employees to buy their own software can be significant:

Because employees officially own licenses rather than the business, the business is unlikely to own sufficient licenses to cover the amount of software in use and may have to purchase replacement licenses – effectively doubling the cost of the license if the employee has claimed the original purchase on expenses!
If the license is a subscription license and the employee leaves or the credit card expires, the subscription may not be renewed, potentially causing a shortfall in licenses which opens your business to financial and contractual risk if the software vendor decides to do a software licensing audit
If the subscription relates to a cloud service and the employee leaves or the credit card expires, the service may simply terminate, leaving your business in the lurch

The solution is to implement centralised software purchasing within the business. Not only does this avoid the issues outlined above, but it also helps build up licensing expertise and, if coupled with effective SAM [link to ‘A guide to software asset management’] and license management processes [‘link to Get in control of your software licensing], can save the business significant sums of money from optimising software licenses as well as improving cyber-security.

Make record keeping a priority

Unfortunately, the onus will always be on you, as a business, to prove that you own the licenses you use. This means that it is vital to maintain accurate records of what software you own, when it was purchased, the specific terms and conditions and use rights associated with the license, and whether you have paid for any additional services such as support and maintenance.

Centralising your software purchasing really helps, but staff turnover can still result in missing records if transactions are made in the name of your procurement administrator. A top tip is to create a generic email address eg licensing@company.com which is used for all licensing related purchases.

Many software vendors also incorporate web pages and document downloads into their license terms and conditions, so it is important to download and store documents and web pages that are referenced in software contracts. Ensure they are dated and annotated so it is clear which contract they relate to and which license terms they may impact.

Turn your reseller into a trusted advisor

When it comes to software licensing, the ‘devil is in the detail’. While it is tempting to always buy software from the cheapest software reseller, this can backfire in the long run as unscrupulous sales people may sell you a non-commercial or even fraudulent software license. Buying from multiple resellers also makes record keeping more difficult and it is easy to ‘lose’ the evidence you need to prove you own a license.

Ideally, businesses should purchase software through a single software reseller who is a software publisher certified partner. Although on the face of it this might seem to reduce your ability to buy software at the best price, most certified software resellers will be happy to negotiate a framework agreement which fixes the price of your most common software purchases and specifies the margin the reseller will charge on other purchases. Framework agreements can be negotiated through a competitive tender process to ensure you get the best overall deal for your business.

The benefits of this approach are two-fold – a) it hugely reduces the administration involved in obtaining quotes, tracking proof of purchase and chasing down all your software contracts, and b) you have access to certified licensing expertise to help you understand the terms and conditions of the licenses and ensure you are using the software correctly.

Software resellers will also be able to provide regular purchase reports, as well as help you manage and maintain vendor licensing portals. These services make it much easier to maintain your all-important software license records, as well as allowing you to validate that your records are correct.
Finally, in addition to simply selling licenses, a good reseller will also be a source of licensing and technical expertise and SAM best practice – in short, your reseller can become a valued and trusted advisor helping you get the most out of your software licenses.

Do you really want the ‘best deal’?

A common tactic for reducing the cost of software is to shop around for the best deal by asking different resellers to supply a quote and going with the lowest.

While this approach works well if you are buying a commodity product, such as a PC, where all vendors are selling the same make and model, this can be dangerous in the world of software because the same functionality can have radically different use rights depending on the specific terms and conditions of the software license being sold.

The saying ‘penny-wise pound-foolish’ is particularly applicable in the world of software, because the costs of accidentally buying the wrong software can be so high, and include cyber-security risks, and the risk of being found non-compliant with the terms and conditions of the licenses. Not to mention the financial costs involved in purchasing new licenses if you buy the incorrect ones in the first place.

Your aim should be to maximise your return on the total investment you make in your software. Implementing effective SAM is key to this, but when buying software, you will find working closely with a single certified software reseller and implementing the following practices help ensure you get the ‘biggest bang for your buck’.

Forecast purchases to enable you to plan and take advantage of volume licenses and discounts for up-front spend commitments

Be clear about your technical roadmap – for instance, software publishers often incentivise sales of cloud software over on-premise software, so if you know you are interested in cloud services, then use that to your advantage

Understand what other benefits may be offered to you eg migration services to help you deploy your new software

Understand whether you require support & maintenance – will you actually use the benefits provided?

Top ten tips for buying software

Follow these top ten tips to ensure you buy the software you need through a route which maximises the return on the investment you are making:

Implement and communicate clear software procurement policies and processes so your employees know how to request and buy software

Centralise the procurement of software and enforce policies that forbid employees purchasing their own software

Use a generic email address for all licence purchases eg licensing@company.com so that records do not become ‘lost’ in the email account of an employee who then leaves the company

Keep all software contracts and other records in a single location and ensure they are referenced so they can easily be found if needed

Make sure you download any web documents referenced in software license contracts; Ensure the downloads are dated and clearly reference the contract they relate to.

Procure software through the smallest number of resellers and certified partners possible and take advantage of the licensing and technical expertise they can provide

Work with your reseller to take advantage of volume licensing discounts and decide whether support and maintenance is right for you

Beware of heavily discounted software as it may be fraudulent or being sold with restricted use rights that make it illegal for use in a commercial organisation

If you’re looking to move to the Cloud, use this as a lever to get the best price and negotiate additional benefits such as support for migration

If you do decide to cancel support and maintenance, make sure you will not be losing extended use rights that you require to be compliant with the terms and conditions of the underlying software license