Surviving an IT contract – a customer’s guide (part 3).

In part 3…

This is the third of a six part series intended to smooth the often-troubled waters of IT contracts. Part one  addressed assessing options, and planning the proposed system. Part two addressed acceptance tests.

What is the scope of the licence?

Does the licence give you the rights you need? Does it capture the requisite duration and geographical regions? You will also need to ask these questions:

  • Who will be licensed to use the software?
  • Is the licence exclusive?
  • Will other companies in your group of companies need to use or access the software? What if one your group companies leaves the group in the future? Will it need an ongoing right to use the software in order to carry on business? This should be negotiated upfront.
  • Will third parties need a right to use or access the software? What about the following:Do you intend to distribute the software? If so, do the rights granted match your plans? Where you plan to commercially exploit or develop the software, the supplier may want to secure an ongoing royalty stream.
  • In the event of an emergency, your third party disaster recovery provider.
  • If your IT functions are outsourced, your IT contractors.
  • If you use the software to provide online services, your clients and end users.
  • Any contractors, temporary staff and agents conducting your core business activities.

What restrictions have been placed on the use of the software?

The licence will generally stipulate what you can and cannot do with the software. Suppliers will argue that they should be able to charge more for the software that is going to be used widely in your business and commercially exploited.


Examine the restrictions carefully as they may be overly restrictive. These may include tying the licence to a specific site, limiting the number of users of the software, or stating that you are only able to run the software on specified hardware. Where restrictions are included, are they appropriate? Will they give you sufficient flexibility in the long term? If not, amendments will need to be negotiated.

Related posts

Surviving an IT contract – a customer’s guide  (part 1)

Surviving an IT contract – a customer’s guide (part 2)


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Intellectual Property
Outsourced In-house Counsel

Posted on: 5 November 2013