Business owners and even lawyers often repeat the same mistakes when they have to deal with tech contracts. Negotiating software and IT contracts isn’t a breeze.
Poor negotiating will have you paying more than you should and ending up either more or fewer licenses than you need.
If you can avoid these five mistakes when you buy software as a service (SaaS) or pay for any other type of license, you are on the right track to maximize your ROI.
Let’s dig in.
Rules for Negotiating Software and IT Contracts
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Don’t Pay for Maintenance unless You Need it
If your vendor asks for maintenance fees from the first day of work, it just doesn’t make sense. It would take them at least a few months before they customize and finalize the software for you. Hence, you don’t need to pay for maintenance or support during this time. Make sure your contract clearly specifies that you will only pay for maintenance once the final product goes live.
Some vendors keep the software fees low and make it up through maintenance fees. Others might really need extra manpower the customization phase, so the fees may be justified. Just talk to your vendor about the fee. It’s easy to spot a legitimate reason to charge a maintenance fee.
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Never Use NDAs for Data Security
You should never rely on nondisclosure agreements (NDAs) for data security. Nondisclosure terms protect trade secrets and not your private data or data held by vendor.
Always go for a real data clause that covers the procedures for protection of data such as encryption, passwords, physical protection of servers, dual control restrictions etc.
3. Never Buy or Rely on Useless SaaS Escrows
You might think of software-as-a-service escrow as an essential thing to buy because you fear what could happens if the vendor goes under. But, as it turns out, the customer cannot run the software if it comes out of escrow.
Worry more about your private data and make sure you have access to it before there is a trouble with your vendor. To detect any financial collapse in advance, consider a few protective actions against vendor bankruptcy — insurance requirements and financial reporting clauses are just two examples.
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Your IP Indemnity Is Important
If a customer combines the product with a third-party source and is sued by another body, the vendor is liable to defend and protect the customer and pay for settlements.
But, many contracts feature exceptions where the customers have no way out. For instance, a common clause that is always brought up when negotiating software and IT contracts says that the vendor does not have to indemnify suits for “use of Vendor’s Technology in combination with hardware or software not provided by Vendor.”
What if the customer uses the product with a browser, office system or other apps to achieve the functionality? That’s right, the clause needs specify that the vendor is not off the hook for unavoidable combinations.
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Include and Edit Specifications
You must carefully read, include and edit specifications in the contract to ensure that everything around the customized specifications, functionality and warranty is clear.
Sounds complicated? Don’t worry – you don’t have to tackle negotiating software and IT contracts on your own. You can always contact our specialists. Request a consultation!