Draft for Tamir's review. Not published.
Measure your own use first
Pull usage and spend for the last year by product, and compare it with what the vendor proposes. For cloud, split the bill by workload and owner, and compare each workload with its business-case assumption. Overruns usually come from a few workloads and from services nobody planned.
Separate waste from growth. Switch off what nobody owns or uses, and show real usage growth on its own. If a license audit is coming, measure your deployment against your contract's definitions before the vendor does.
Read the terms the discount depends on
A commitment sized to a discount becomes a bill for unused products for years. Check the terms on shortfall, true-up and renewal price, and what happens if part of your stack leaves the vendor. Ask what the vendor offers at a lower commitment or a shorter term. Deadlines recur, and commitments do not expire.
When pricing moves to usage, such as production volume or API calls, ask for a written definition of what is billable. Compare the cost under low, normal and high scenarios. Treat a new AI tier as a new purchase: ask what it does, what data it uses and whether the old plan still exists.
Where the seats differ
If you're on the board or the audit committee, ask for usage against the proposed commitment before you approve, and get the deadline in writing. After a license audit settlement, ask how the exposure arose and who owns license compliance. Then require an inventory, a review of the largest contracts and a procedure for the next notice.
If you run the company, establish what you need to keep running and a credible alternative before you negotiate, so a threat to leave is real. If you're the CIO or CTO, bring the CFO the gaps by workload or product, with waste and growth shown apart.
What to check before you decide
- Pull actual usage and spend by product or workload for the last year, and compare them with the proposal.
- Read the shortfall, true-up, renewal price and exit terms before you commit.
- List bundled products or modules nobody uses, and ask to remove them or make them optional.
- Ask for a written definition of every usage-based charge, and model it under low and high scenarios.
- Ask for the discount on a shorter term or a lower commitment, and see what the vendor does.
- Check the data processing terms for any new AI features, including training on your data.
- Name an owner for license compliance, with an inventory of deployments against entitlements.
Questions people ask
A software license audit cost us a settlement, how does the audit committee assess what happened and what controls to require?
Ask how the exposure arose: unmanaged deployment, unclear contract terms, no inventory, and who owned license compliance. Then require an inventory, an owner, a review of the largest vendor contracts and a response plan for the next audit notice. It depends on how many vendors have audit rights and on whether anyone tracks deployment against entitlement.
Board asked to approve a multi year committed spend agreement before a quarter end deadline, what should we check?
Check the commitment against actual use plus demonstrated growth, the terms on shortfall and true-up, the products in the bundle nobody uses, and what the company loses if part of its stack leaves the vendor. Deadlines recur; commitments do not expire. It depends on usage stability and on what the vendor accepts at a lower commitment.
Should we renew warehouse software modules our factory rarely uses?
Renew the capabilities the operating model needs and can use. Scope depends on actual dependencies, retained workflows, and whether unused modules support any essential function indirectly.
How should we respond when a critical clinical software renewal becomes unaffordable?
Establish continuity needs and a credible alternative before choosing negotiation or exit. It depends on usable data rights, replacement feasibility, support conditions, and the cost of remaining temporarily.
Software vendor raised renewal price for AI features we didn't ask for, how should I evaluate before renewing?
Treat the AI tier as a new purchase, so ask what task it performs, what data it uses and what you can switch off. Check whether the old plan still exists and what the renewal terms say about tier changes. It depends on whether anyone in the company would use the features and on where the data goes.
Cloud costs are way above the migration business case a year later, how do I find out why before the budget review?
Split the bill into workloads and compare each with its business-case assumption, because overruns usually come from a few workloads and from services nobody planned. Then separate waste from growth. It depends on whether the business case counted all the services actually used and on how much usage grew.
Vendor offers a big discount on a multi year committed spend agreement, how do I decide what to commit to?
Commit only to what you already use plus growth you can show, and treat the rest of the bundle as free samples the vendor hopes you will depend on. Check true-up, shortfall and exit terms, because the discount is paid for there. It depends on how stable your use is and on whether any part of your stack may leave this vendor in the term.
Software vendor announced a license audit and we may be over deployed, how should we prepare and what are our options?
Measure your own deployment before the vendor does, with the vendor's own metrics and your contract's definitions, so you know the exposure and can fix what is easy before the audit. Then decide on remediation, negotiation or migration with numbers. It depends on your contract's audit clause and on how much of the over-deployment is accidental and fixable.
Should industrial software fees rise whenever our production volume increases?
Compare the proposed metric with the value delivered and costs under plausible operating scenarios. A volume-based model can be reasonable, but it depends on measurement rules, predictability, and alternatives to the commitment.
Should we renew core software when API charges grow with customer activity?
Compare the proposed fees against actual usage categories and credible growth scenarios before renewing. It depends on billable definitions, internal traffic, minimum commitments, and the practical alternatives to the supplier.
How I can help with this decision
- Ask or talk (Free)
- I give my view on where the extra cost usually comes from and which terms turn a discount into a cost.
- Review (Pay if it was worth it)
- I write an independent review of the renewal, the agreement or the cloud spend against your usage and plans. I recommend a commitment level, the terms to change and where to cut.