Declaration clauses – the new devil in the contract details?
The continuing rise of subscription based software licensing is creating new challenges for license
managers and software asset management. In consulting engagements I repeatedly see a wide gap
between the software acquisition function and the software asset management operation. The gap
is where a contract and documentation management function should exist to trap, read and codify
the relevant terms and conditions embedded in the contract. This activity not only helps to ensure
that we stay compliant, but highlights any benefits that we may be able to exploit such as being able
to use software on multiple mobile devices (counting as a single license). Inevitably where we do not
understand where there may be opportunities or risks in a contract, the only winner is the vendor.
The assumption is often made that the ‘legal’ department or acquisition functions will be responsible
for performing due diligence on the contract because they are the ones that have ‘always handled
contracts’ or they have a new ‘contract management system’; unfortunately these processes and
systems are largely not fit for purpose for managing the details that software licensing requires and
the software asset management operation must step in.
Software vendors may be aware of this gap and see it as an opportunity to implement new software
metrics and obligations via amendments to the contracts on renewal, knowing there will be little
resistance. One practical process that should be implemented by software asset management is to
provide (and maintain) a list of ‘must check’ contractual items to whoever manages and/or
negotiates software contracts. This list will normally start with the (hopefully) well understood ‘audit
clause’ (where the software copyright holder states their right to audit the user of the software).
However, we must now also include the ‘declaration’ to our list of must check clauses, in effect a
subtler version of the audit clause - but with a similar potential for disruption to the SAM and license
management operation.
The declaration clause
I have provided an ‘example’ declaration clause below (based on the language used from several
software vendors).
“During the contract period ‘the Company’ shall provide ‘the vendor’ with a written statement
certifying the total number of licences that the Company has deployed. This shall be provided every
six months in a pre-defined template and signed by an authorized officer of the Company. The
statement shall contain, at a minimum, the software products deployed, quantity, location and a
confirmation that at no time did the Company exceed their license entitlement. The vendor may, at
its discretion, validate the customer statement through a formal assessment.“
Those of us who have been involved with ‘enterprise agreements’ in their various incarnations for
different vendors will recognise the similarities to a ‘true-up’ obligation, but the devil is in the detail.
This is effectively a ‘self-audit’ clause and they are now appearing in small contracts with a total
value of only several hundred dollars.
These types of clause raise questions that may have a profound impact on our SAM operation such
as:
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Is the software asset manager an ‘authorised officer of the company’? If not, who is?
Can we report on the deployment of the software products in the format required?


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Are we able to confirm that at no time the license entitlement was exceeded?
Are we even resourced to generate the data and declare every six months?
Do we have a compliance calendar or system to track these declaration dates (can we put
any more than a single contract renewal date in our contract management system or SAM
tool)?
The final sentence in my example clause is possibly the killer blow: The vendor reserves the right to
validate what you send (effectively the route into an audit). This makes it real; the last thing SAM
managers need is another opportunity for vendors to come knocking.
Conclusion
In SAM, forewarned is forearmed and we should be proactive in our response. Use the additional
audit threat embedded in these clauses to support the case for better contract management.
Improve the process for reviewing contractual terms and conditions by generating a list of ‘must
check’ clauses and educate all parties involved in contract negotiation and renewal. Build and
maintain a compliance calendar including not only renewal dates but declaration dates, giving
yourself plenty of notice to collect the relevant data. Assess your ability to declare and build the
business case for additional support if necessary.
It has taken years and possibly many painful audits for organisations to get to grips with the
implications of the ‘audit clause’, let’s not let the declaration clause take us down the same path
simply because no-one knew who was responsible for ‘reading the contract’.
Author: Hugh Skingley, Senior consultant, Livingstone.