Negotiations Training

Agreements and Technology:
Tips for Negotiating Technology Agreements

Every organization must deal with technology in a variety of different fronts. Sales departments are relying increasingly on Customer Resource Management applications by vendors like Seibel or Salesforce.com. IT departments are utilizing a whole spectrum of tools and applications to manage networks, databases, servers and all the other "guts" that keep a business running smoothly. The size of the company is irrelevant. Save for a handful of holdouts who dislike automation and technology, organizations need to ensure that relations with technology vendors and suppliers are handled intelligently.

Since technology has such a great deal of influence, those who negotiate with technology departments, regardless of whether a contract is for hardware, software, or services, need to handle agreements differently than other vendor relationships. Techonology agreements have their own nuances and potential pitfalls. Listed below are seven tips that every contracts and purchasing department should know and utilize whenever negotiating with a technology vendor.

Seven Rules for Technology Agreements:

Rule #1 - Establish Service Level Agreements - Regardless of what form SLAs may take (this is something you will need to determine), every technology agreement needs to have some sort of Service Level Agreements established. SLAs may relate to product performance, uptime, response time or a whole host of other factors.

Rule #2 - Beware Maintenance Fees - Some software companies are well known for providing cut-rate prices on software but then charging exorbitant maintenance fees. When negotiating an agreement, understand how much maintenance fees will cost, what they will cover and how long you must pay them. Also, determine the implications of canceling maintenance.

Rule #3 - Check IP Rights - The vendor should be liable and assume responsibility of all intellectual property. Many will also require that the rights for any products developed for your company (in the case of a development project) will belong to the vendor. Determine your company's stance on IP rights as many vendors consider this a deal-breaker... rightfully so.

Rule #4 - Establish a Scope - If you're dealing with service engagements or installation projects, have a clear and well-defined scope. This should include exactly what is (and is not) included, the cost, the delivery dates, the resources involved, assumptions and other relevant factors. Ensure that the vendor has a project manager or other main contact assigned to any project, as well.

Rule #5 - Look for Warranties - The last thing you want to do is deploy a product that is faulty and is without a warranty. Look for agreements that include warranties on any products or services.

Rule #6 - Beware "Limitations of Liability" - This is one of those clauses where a vendor is often trying to protect themselves in case their product fails and leads to a catastrophe or their service engagement is a fiasco. Imagine what would happen if a faulty product brought down an online brokerage firm's network for an hour during the trading day. With a limitation of liability, the vendor is protected while the firm suffers. Look for these clauses as they protect vendors, not customers.

Rule #7 - Beware the Renegotiation - Some vendors will say just about anything to get your business but will then come to you looking to renegotiate an agreement. This usually takes place either when they realize the error of their ways or want to squeeze more money out of a deal. Beware the sales reps who comes knocking looking for a renegotiated agreement.