Many companies treat the purchase of computer systems like the purchase of a commodity. That can be a big mistake.
The software company you are dealing with is not like your other vendors. If you treat the transaction like you’re buying supplies, and focus only on price and delivery, you may very well set the stage for failure.
The stakes can be very high, as failed IT projects can even put companies out of business.
Here are six things you should think about, for starters.
1. Implementation of netsuite support solutions and other software is a collaborative effort between the software vendor and the customer. You are a partner in the endeavor and must bring knowledge and skill to the table along with a commitment to spend the necessary time and devote the necessary human resources. Pest control exterminators may partner up with companies like FieldRoutes that can provide a software to help them maximize their resources and improve their productivity.
2. Clear and open communication is essential. Of course, you need to communicate your objectives to the software vendor. But even more important, you must listen to what your software vendor tells you. The biggest sources of failure are the misunderstandings that develop between what the customer expects, on the one hand, and what the software vendor can deliver. Even if your software vendor knows that a particular feature of the product is not what you have in mind, he may rely on his ability to persuade you later in the process of implementation that the product provides a better way of addressing your needs than what you thought you were getting.
Plus, you need to be on your guard. The software solution is what it is, and that is what the software vendor has to sell. You have to learn what it can do and what it cannot do. Remember, the software vendor is selling and may not volunteer the product’s shortcomings unless you do enough probing.
3. Negotiate the payment terms. Most software companies will accept a progress payment format. Your goal should be to tie payments to the achievement of milestones in the implementation process. For example, you will want to limit how much you invest in the project before the details are settled in a project plan or specification document. And, you will want to hold back something until the solution has been tested and accepted. The software vendor legitimately needs to be paid for the work as it’s being performed. But if it wants too much of the license fee paid too fast, that’s a sign that what it really wants is leverage. Also, be ready to hear about the software vendor’s “revenue recognition” accounting problem, and take it with a grain of salt.
4. Don’t forget to include the “professional services” piece in the contract. Normally, the software vendor will provide a license agreement with provisions that include ongoing support and maintenance, but the contract may say little if anything about implementation services beyond stating that you have to pay for them on a time- and- materials basis. The contract should spell out what responsibilities the software vendor will bear, and you should build in protection against the price and timeframe getting out of hand.
5. The contract should define service levels that must be met for the implementation to be considered complete, and also for ongoing maintenance services. Many software vendors have standard service level practices that can be built into the contract, and that also can be negotiated.
6. If the scope of the license is limited, for example, by the number of users, you should attempt to build in price protection for expanded usage in the future. Most software companies will be willing to do that.
Software license transactions can be complicated, and the price tag for the software is not always commensurate with the level of risk involved. You don’t want to find yourself way over budget for a mission critical application, stuck in a process that has no end in sight. Due diligence on the front end is essential. So is the right attitude going in, and the negotiation of appropriate contract protections.
Richard S. Marcus is a shareholder at Godfrey & Kahn, S.C.’s E-Business & Information Technology and Tax Planning Groups in the firm’s Milwaukee office. He can be reached at rmarcus@gklaw.com or 414-287-9640.
