Don’t Fall Into This Software License Trap

If you're signing a software license agreement, then there's 1 tip I have for you.

Never overlook the contract that you sign.

Just read every single line on that Contract.

The best case scenario is having a lawyer do it for you.

But I understand a lot of people signing the agreement will not have the budget for it.

So even if you're doing it alone, give the entire agreement a good read.

Why?

Because everything rests on the software license grant.

And what's at stake is potentially everything.

The License Grant: Where It All Begins

The license grant is the backbone of the agreement.

It's where the vendors set the rules for how you can use their software.

It defines:

- User Access: How many users can access the software.

- Duration: How long you can use the software.

- Usage Rights: The specific ways the software can be used.

But here's the catch.

Vendors like to keep these terms as restrictive as possible.

They want control.

The more limited your license, the more leverage they have over your business.

Need to expand? That'll cost you.

Want to add more users? Be prepared to renegotiate.

But this is just the beginning.

The real issue happens when your needs outgrow the license you initially signed.

Where Most Businesses Go Wrong

Many new business owners fall into traps.

Or they might have inexperienced lawyers who assume everything is standard.

There are a couple of mistake I have most commonly seen:

1) Assuming the License Will Grow With You:

You think you can add more users as your business grows, right?

Wrong.

If you haven’t negotiated flexibility upfront, you'll find yourself locked into terms that no longer fit your needs.

Say for example - your team grows and suddenly you need 20 users instead of 10.

The license you signed might not allow for it.

Now, you’re faced with either paying significantly more or risking a breach of contract.

2) Overlooking the Fine Print:

It’s easy to skim through the legalese, thinking it’s all standard stuff.

But the details matter a lot.

Vendors usually add clauses that impose additional fees for seemingly minor changes.

Or severely limit your usage rights.

Some of these restrictions could be geographical limitations or hardware constraints.

Sometimes even specific types of projects the software can be used for be restricted.

If you miss these details, and you could end up with unexpected costs.

Or worse, a software solution that’s practically useless for your needs.

3) Relying on Verbal Assurances:

This is rare, but it still happens.

During the sales pitch, vendors might promise you the world.

But if those promises aren’t in writing, they don’t exist.

Verbal promises are not legally binding.

What matters is what’s in writing.

Vendors may promise flexibility during the sales process.

But if those promises aren’t reflected in the contract, they won’t hold up in a dispute.

4) Ignoring Future Growth:

Maybe the license fits your needs today, but what about tomorrow?

Businesses often sign licenses that suit their current needs without considering future expansion.

If your business grows, but your license doesn’t account for it, you’re in trouble.

You might find yourself paying through the nose for additional licenses.

Or face restrictive terms that choke your growth.

Example Scenario

Say you license project management software for 10 users.

As your business grows, you need to expand to 20 users.

But the license you signed doesn’t allow for that.

Now, you’re in a bind.

You’re either forced to pay significantly more for an expanded license.

Or risk breaching the contract—a move that could lead to legal disputes and even greater costs.

Sometimes, these licenses are set up as traps—designed to look reasonable at first.

But they are structured to catch you off guard as your needs grow.

Once you’re locked into a narrow license, getting out can be next to impossible without facing more costs.

And let’s not forget:

If your business relies heavily on this software, the vendor knows they’ve got you right where they want you.

Our Step To Avoid These Traps

So, how do you protect your business when negotiating a software license agreement?

Here's what we suggest overall:

Step 1 - Push for a Broader License

Don’t settle for a restrictive license.

From the start, negotiate for a broader license.

Something that allows flexibility in user numbers, usage duration, and the scope of use.

Make sure the license accounts for your potential growth, so you’re not boxed in as your business scales.

This means negotiating terms that allow for additional users, and extended usage rights.

And the ability to expand into new regions or departments without having to renegotiate the entire contract.

Step 2 - Specify Future Needs

Don’t just think about what you need today.

Think about what you’ll need tomorrow.

Make sure the contract covers the terms that cover future expansion.

For e.g., the option to add users at a predetermined rate.

Or clauses that allow for usage in new areas as your business grows.

If you lock these terms now, you save yourself from costly renegotiations later on.

Step 3 - Detail Usage Rights

Be clear about how, where, and by whom the software can be used.

Make sure the contract includes points for different use cases, such as remote work or use across multiple devices.

Also, clarify any limitations.

And negotiate for the removal of unnecessary restrictions that could hinder your operations.

For example, if the software is critical for remote teams, make sure the contract allows for unlimited access across all locations.

Final Notes

Most of the time, software licene agreements can be a minefield.

And without carefully reading them, you can find yourself trapped in an agreement that doesn't meet your requirements.

So always push for broader terms.

Make sure to consider your future requirements.

Take the time to understand the terms and negotiate for the flexibility.

Your business needs it to thrive.

If you need my assistance in reviewing or negotiating a software license agreement, feel free to reach out.

Just reply with "LICENSE" and I will send you the steps on how we can work together.

Talk to you soon.

-- Akhil Mishra