Australian Software Asset Management Association




Software Asset Management 

Software Contract Planning

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The time and effort spent on software contract planning will provide benefits many times over from the investment made into planning. The planning activity is designed to ensure that all possible software contract benefits are identified and that a plan on how to deliver the outcomes from those benefits can be achieved.

Software contract planning will consider a number of important factors that are required for the management of the contract. These factors include; scoping of the contract, the level of services required and what dependencies that are to be provided by the organisation, how will the quality be monitored, measured and reported, what are the critical service levels and what flexibility is there to change the service levels as business requirements change. In addition what is the value to be derived from the contract, what mitigation strategies are to be implemented to protect against value leakage, how can additional value be created from the contract, how will the software vendor work with other software vendors for the delivery of business systems, how will continuous improvement be undertaken, measured and finally what will be the reporting requirements for the contract.

Planning to ensure that the right people are available to manage software contracts is very important. The right mix of skills, experience, aptitude and attitude are important ingredients of a contract manager. Planning to ensure the contract management role duties are fully developed, undertaking recruitment to get the right person and then having established the right retention strategies are also very important to plan and execute on.

The level of planning required will be determined on the type of software contract; strategic software contracts would have a lot of planning, whereas at the other end of the scale transaction software contract would have minimal planning undertaken. Generally software contracts fall within three categories; Strategic, Operational and Transactional. As stated before, strategic software contracts require the highest level of planning, operational software contracts some planning is required to ensure operational requirements can be met and transactional software contracts would have minimal planning. Strategic software contracts can be classified as supporting strategic business systems, they require the software vendor to be closely aligned to the business and the software contract may be quite complex in nature. If the software vendor fails in providing software and software support, to support the business system, then the business will be highly affected. Operational contracts support the day-to-day requirements of the business. This software support also requires the vendor to be aligned to the business, however if the software or the software support fails, it is not a critical failure to the business. Recovery of the business system whilst disruptive, it is not a critical failure to the business. Transactional contracts are usually based on an event where a purchase of software and/or services is undertaken. The software vendor does not have to be aligned to the business as they do not provide software or services that support critical business systems. Often they are providing commodity software and/or services that can be provided by another software vendor as well.

A risk analysis should be undertaken during the software contract planning phase. The risk analysis will identify if the software contract will be strategic, operational or transactional. When a software vendor is selected to provide software and/or services, then the risk analysis can be transformed into a risk assessment based on the specific software vendor that was selected for strategic and operational software contracts.

The planning phase will also identify the expected benefits that will be derived from the software contract. Included in this planning will be the process on how to identify, monitor, measure and report on these planned benefits. A reality test should be undertaken to ensure the benefits are achievable and that they can be readily reported on. Benefits can be of a financial and non-financial nature.

In summary, software contract planning is a necessary activity to undertake prior to releasing a contract to the market. Contract planning provides a systemic approach to identify the software and/or services that are required and the dependencies on the provision of the software and/or services. Software contract planning identifies the type of software contract and importance to the business, what are the risks, benefits and how will the software contract be monitored and measured for both risks and benefits. Planning to select the right staff to undertake software contract management is crucial.


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