Closing the deal for the sale of some technology or services is not dissimilar to getting a “yes” to that all important proposal. Hopefully, it is the start of a long and fruitful relationship.
Unfortunately one of the key things overlooked in any technology procurement (whether it is hardware, software or services) is that the purchase will almost always be just the start of a longer term and possibly wider relationship. Too often the parties focus on the immediacy of the closing and the dollars right now and don’t consider how the now decisions might impact on the future. With a software licence for example both the vendor and the customer will need to consider how the software will be used, how this might change over time, what it might interface with, how that might change over time, what support is needed etc.
It is best if the contract process is not seen as a necessary evil but as an opportunity to explore how the relationship is likely to evolve over time.
In approaching any technology procurement, and the contract that records it, the contract should tell the story of the relationship. Whether you are a customer or a vendor you should think about the three stages of the relationship:
• How will this relationship start? (how do I get to business as usual?)
• How will it operate in business as usual (what are my expectations about business as usual?); and
• How will we part company if that is necessary?
My other strong recommendation (unless you like long difficult negotiations) is try to think about each of these stages from both the vendor and customer perspective, no matter what side of the negotiating table you sit.
Ask yourself, what do we need out of this and what do they need out of this? The relationship will always be one where the parties are dependent on each other and so ensuring that it works for your partner will make the relationship a much happier one.
If it isn’t working for the other party, you will certainly know about it and it is likely they will be looking for ways to get out or to re-balance the benefits.
The contract should address how the parties need to work together when the relationship starts:
1. What is the current environment for each party?
2. Where do they need to be before the work can start?
3. What does the vendor have to supply?
4. What does the customer have to supply?
5. What needs to change before the purchase is of use?
6. Who has to do the things that need to change?
7. If you are the vendor, will you be paid for it?
8. How do you know that it is ready for business as usual? Acceptance testing?
9. How long before the parties get impatient and decide it is not going to work?
10. If it doesn’t work how will the parties part company given things haven’t really started?
11. Will there be any payments?
12. Will there be any refunds?
13. Who gets to keep the things created so far?
14. Are the answers to the above questions on termination different if the agreement is terminated because of one person or the other?
Once you’ve navigated these waters, then your contract needs to address business as usual and what if everything goes wrong and the parties have to part company.
With any technology contract the dependence of the customer on the vendor is likely to be greater than for more traditional supplies. The success or perceived success of the sale will to an extent be dependent on how well the parties interact and treat each other at each phase of the relationship. Obviously a vendor has to see the sale as a success too. To do this there has to be a fair allocation of risk, reward and responsibility.
Like with any good marriage, most of the issues will be able to be solved with a good dialogue between the parties. And like any proposal it would be good to have as many of these sorted out before the parties say “I do”.
Because, it is better not to go there if the couples’ expectations aren’t aligned than to incur the cost of the divorce lawyer when it subsequently doesn’t meet a party’s expectations.
Simon Martin is a partner at Hudson Gavin Martin, a boutique IP and technology law firm in Auckland.
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