5 Essentials to Check in An ERP Software Licence Agreement

Digitalisation - Publications ERP - Publications By: Dr. Harald Dreher - Aug 16, 2021

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An important milestone in an ERP selection and a planned ERP introduction and implementation is the receipt of the ERP software licence agreement. This usually describes the expected scope, costs, schedule and other important components of the procurement and use of software.

Man checking an erp software license agreement

An important milestone in an ERP selection and a planned ERP introduction and implementation is the receipt of the ERP software licence agreement. This usually describes the expected scope, costs, schedule and other important components of the procurement and use of software.

 

ERP software licence agreement

How should you check this agreement? What should you pay attention to?

An important milestone in an ERP selection and a planned ERP introduction and implementation is the receipt of the ERP software licence agreement. This usually describes the expected scope, cost, schedule and other important components of the procurement and use of software. This contract may be drafted as a licence agreement or as a purchase agreement or transfer agreement. It may also contain information on adaptations to existing systems (interfaces), programming of interfaces, data transfer procedures and other contents associated with an ERP implementation. It is not uncommon for this contract to also describe elements of future maintenance, the start of maintenance and training expenses.

 

We would like to give you some tips and assistance from our experience that can help you, firstly, to identify the terminology used and, secondly, five points that you should pay attention to:

  1. Get a clear overview of the exact scope that needs to be described in the licence agreement for an ERP software. Often it sounds relatively simple and trivial when describing the software. Make sure to clarify whether the sales versions used in the demo are also the versions that will be implemented. Constant updates of software versions, modules and other components can lead to ambiguities. Is the definition of possible types of use such as "full user", "administration" or only "read licence" unambiguous?
  2. Get clarity on important prerequisites for the ERP software implementation. Are the roles and responsibilities of the stakeholders clear and well defined? Are these roles also to be provided by the stakeholders in the same way? This of course includes costs, budgets, timelines and addressing risks. Try to identify the risks as much as possible and then describe them clearly in the contract management. This will give you the opportunity to initiate solutions and measures if there are changes in the project plan during the ERP implementation. Everyone involved will then know how to proceed and how to proceed. 
  3. Comparing 2 offers from different ERP software houses and ERP implementation partners is not easy. It is in the interest of the software providers to structure their offers in such a way that they are hardly comparable. Even for professionals who spend a large part of their work comparing such offers and making them transparent, it is often difficult. The differentiation is often made by listing different modules where provider A integrates them, provider B breaks them down, but others are integrated instead. The expenses for the transfer of old data from the previous systems to the new systems are important points that you should have presented to you in detail so that you do not exceed the budget limits during an introduction. These expenses are often underestimated.
  4. Keep your focus on the support of the business processes by the new ERP software. No software or user interface or management dashboard, no matter how beautiful, is of any use to you if its processes to the customer are not supported. Process excellence and lean, efficient processes are one of the keys to your competitiveness. It is therefore essential to compare the implementation descriptions of the ERP software and ERP licence agreement with your requirements from the ERP specifications. This is the only way to ensure that you will receive the process support you agreed to in the specifications. Maintain this discipline of testing and focusing on your requirements management (specifications) and delivered (software implementation) from the first hour to the end of the project. Your project outcome will guide you in your approach at the
  5. Look for points and requirements that you miss in the ERP purchase contract. Software vendors and ERP implementation partners are usually good at installing, configuring and customising their software. This is part of the core business of ERP software partners. We see time and again that these vendors are not so good at the process side. But this is exactly one of the crucial points for the success of your project. Make sure that the contract management defines exactly which procedures will be applied should process changes or additional expenses for adjustments become necessary. Define clear reporting structures for such possible adjustments that are not yet apparent at the beginning of an ERP implementation project and adhere to them in a disciplined manner. A clear release or change process will help you avoid mistakes.

Evaluating licensing or software contracts for ERP purchase or use of enterprise software is never easy. However, if you know the important points and subtleties, you will not only find the right software, but also implement it in a way that meets your requirements and expectations.

 

 

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We hope you find this publication useful. If you have any further questions on this topic, we look forward to hearing from you." - Dr Harald Dreher