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Close The Software Negotiation GAAP!

Buyers Must Help Vendors Work Around Their Accounting Constraints

January 2, 2007

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Authors

  • By Duncan Jones
  • with Andrew Parker,
  • Caroline Roeleveld-Hoekendijk

Why Read This Brief

Software vendors frequently refuse to give in to IT buyers' perfectly reasonable commercial requests for simple contractual commitments covering future license audits, maintenance price increases, and product enhancements. One reason for this that buyers often fail to grasp properly is "revenue recognition," a fascinating topic for accountants and a pain in the wallet for salespeople. IT buyers who understand the importance of this issue and why it is a problem will be able to work with their vendors to get closer to the commercial terms they want, without upsetting the accountants. This document aims to demystify the "black art" of revenue recognition so that sourcing professionals can build an appreciation of this into their negotiating tactics with software vendors.

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