Inking The Deal: What We’ll Discuss at the #15NTC Contract Negotiation Session

This post originally appeared on the NTEN Blog on January 20th, 2015.

For this month’s Connect theme, a number of speakers are previewing the great breakout sessions they are preparing for the 2015 Nonprofit Technology Conference in Austin, TX March 4-6. Following is a preview of one of over 100 breakout sessions.

The 15NTC session, “Software and Service Contracts: How To Negotiate Reasonable Terms in the Cloud Era” is the third in my series of, “How wonky can we get?” information exchanges. At the 2013 Nonprofit Technology Conference in Minneapolis, I spoke on Project Management; and last year, in DC, on Requests for Proposals. While these topics aren’t quite as trendy as data visualization and the mobile web, they are focused on the job skills that allow us to do all of the cool stuff. As a nonprofit technology executive, I’ve bought and deployed a lot of systems. Sharing what I’ve learned along the way is the least I can give back to a great Community like NTEN. What are the things that have to be in place in order to successfully roll out software and systems?

  1. Good project management: in particular, the right methodology for the job
  2. A thorough selection process, one that doesn’t let the desire for a low-fixed bid trump the priority of selecting the right system or partner
  3. A contract with that vendor that fairly establishes the remedies should things with the vendor go wrong

I try and bring a few things to these sessions to make them memorable. In this case, the move from server rooms to cloud-based server farms has changed the dynamic of our customer/vendor relationships. Software contracts need to reflect that. In the cloud, we have new issues to negotiate, such as:

  1. What happens to customer data when a vendor goes out of business?
  2. Do our negotiated terms apply to subcontractors, when, say, the vendor’s service uses Amazon as a storage platform?
  3. Who is responsible when something breaks?

Mostly, I want to impress upon everyone that terms can be negotiated. In these days of shrink wrap software licenses, many nonprofits forget that we can protect ourselves from nasty terms. Here are some quick thoughts:

  1. Vendors should tie termination fees to strong service level agreements, or waive them altogether in cloud contracts, where they should merit your monthly payments by providing a  solid service
  2. Who benefits from automatic renewals? Should you sign a contract that renews automatically at the original term if the original term is three years or more?
  3. The jurisdiction that governs the remedies should be your home state or, at worst, theirs.  Beware: some vendors are fine about choosing obscure courts that they know will protect their interests

And, finally, I’ll offer a few tips on the negotiating process. Some co-workers of mine have expressed concerns that bickering over contract details can hurt the vendor relationship. Done right, the contract negotiation establishes a tone in the relationship that will last throughout the engagement, and it’s one of mutual respect and a commitment to confront key issues, rather than to avoid them.

So don’t be afraid to get wonky! Join me at the 15NTC for a session that might not be the sexiest you attend, but will provide you with the tools you need to protect your technology investments.

About the author:

By day, Peter Campbell is the CIO at Legal Services Corporation, America’s Partner for Equal Justice. At other times, he can be found blogging and talking about all things nptech at Techcafeteria or on Twitter.

Image credit: “The Land of Contracts” by David Anthony Colarusso

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2 thoughts on “Inking The Deal: What We’ll Discuss at the #15NTC Contract Negotiation Session

  1. Dan Mullins

    Peter, I still question the desire to push web/cloud services. I don’t understand why an organization that has the staff, hardware and experience needs to invest into an Never Ending service agreement.

  2. techcafe Post author

    Dan — Whether or not you should move to the cloud is a critical question. Most of my contract advice covers in-house as well as cloud contracts (and a lot of points cover both, as they’re aimed at consulting contracts). I’d take your point that an endless service agreement isn’t necessarily a good budget choice, and even amplify it for nonprofits, where you might well be trading capital for non-capital expense, and adding it to the overhead ratio. But those monthly fees will often offset internal costs for hardware, maintenance, server room cooling and staff expertise. A cloud service might offer much better security. The budget analysis is far more complex than monthly vs one time costs, because your software and hardware come with all sorts of monthly costs, whether or not you pay for software maintenance and support.

    In my case, I’m sick of managing SANs. I am all for paying monthly fees to outsource the storage of our primary data, ease the delivery of remote access to the point where Citrix or RDS are only needed for a few staff (or not needed at all); and hand the FISMA compliance requirements to Salesforce and Box. That’s going to save me money and problems in-house.

    It’s not a “you should go to the cloud” slamdunk. It’s a new option that has it’s advantages and disadvantages. You should look at it that way: optional, and possibly an opportunity, in some cases.

    But you should also see a bit of the writing on the wall. Microsoft wants you on Office 365. They are already looking at ways that they can make it less appealing to do things in-house. In 2015, it’s still very much up to us to decide whether we want to outsource applications. By 2017 or 2018, we might find ourselves at a real disadvantage if our vendors are obsolescing their in-house product options.

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