The critical success factors (CSFs) for Enterprise Software contract negotiations

Abstract

Purpose – As the wrong Enterprise Software (ES) acquisition can lead an organization with chronically exceeded budgets and settling for minimum returns, so can an unfavorable contractual agreement. Often the acquiring organizations become vulnerable to risks and mistakes as the software contracts are habitually written using legal terminologies and mainly to the advantage of the vendor. To avoid costly ES contracting mistakes, the purpose of this paper is to empirically identify the critical success factors (CSFs) of contracting in the context of ES acquisition. Design/methodology/approach – A questionnaire survey was conducted to gather the data for this study. Statistical analysis conducted for this study include descriptive statistics, factor analysis with reliability and validity tests and nonparametric test. Findings – The five key factors are: contractual assurance, forward compatibility and licensing; right to use, own and use of own, confidentiality and payment; software acceptance; license assignment; and vendor obligation for intellectual property. The research and managerial implications of these factors are given in discussion. Research limitations/implications – As with most empirical studies, the subjectivity of the opinion of respondents from only two industries presents some limitations to generalization. Another limitation is the respondent has been asked for the degree of criticality for each of the contracting issue given in the questionnaire. There could be critical issues other than the listed ones which are more specific to the organization. Practical implications – The results can be used by managers to improve their understanding on the critical contractual issues in ES acquisition negotiations. Originality/value – The significant value of this study identifies the CSFs for ES contract negotiations while acquiring the software.