HP/Compaq users urged to exercise caution

Caution should be the key word for companies planning to make large-scale technology purchases from either Hewlett-Packard Co. or Compaq Computer Corp. in the next few months.

Yesterday's announcement of the planned acquisition of Compaq by HP raises questions about the long-term viability of several products and services, and users need to be careful how they negotiate purchase contracts with either vendor, analysts said.

"The best advice for customers [thinking of purchasing from either company] right now would be to stay the course," said Terry Shannon, editor of "Shannon Knows Compaq," an Ashland, Mass.-based newsletter.

Any move to drop or phase out products won't occur until well into next year, and after the merger has been approved, Shannon said.

"I would make sure that maintenance contracts are ironclad and completely thought out before making long-term commitments on any product line that is even remotely in an iffy category," said David Ochroch, a senior analyst at Reiner Associates Inc., a San Francisco-based contract management consulting firm.

Ochroch and Marie T. Reeve, a vice president at Cicala & Associates LLC, a Hoboken, N.J.-based contract management consultancy, made these suggestions:

-- Ask for at least 36 months' notice when hardware, an operating system or a system software product will be discontinued. Know what the vendor's transition plans are and what you need to do to get ready.

-- When dealing with application vendors, get it in the contract that the software will continue to be supported and maintained on whatever Compaq or HP platform it is running on for the life of your application.

-- Get in writing how long upgrades will be available for hardware, operating systems and any system software that is provided by the respective vendors, especially when dealing with proprietary categories such as Compaq's Tru64 Unix, OpenVMS and its Non-Stop Himalaya technologies.

-- Negotiate price caps on maintenance agreements relating to hardware, system software and operating systems, especially when dealing with technologies that are likely to be dropped or phased out. When hardware vendors decide to eliminate models, they sometimes raise maintenance costs so high that it becomes more cost-effective to simply switch platforms, Reeve said.

-- When negotiating service-level agreements, try to ensure that you will be compensated for any loss in quality and response times that are likely to result from job cuts or other cost-cutting moves.

-- Beware of resellers and application providers holding fire sales on Compaq or HP products. There's no knowing which will survive the merger, Reeve said.

-- If there are concerns that your platform may be jettisoned, be sure that you have access to all the source code and loading libraries needed to port your applications to other platforms, Ochroch said. This can be ensured in a software escrow agreement, in which a third party holds a copy of an application vendor's source code and loading libraries. That way, users have access to the code if a vendor withdraws maintenance and support for the product.

-- Given the size and reputation of the two companies involved in the merger, it's highly unlikely that such an escrow arrangement will be needed, Ochroch said. "But you never know. . . . These are tough economic times," Ochroch said.

-- If you have a sufficiently large purchase, it might also be a good idea to negotiate for a "parts depot" in the contract, Ochroch said. Under this arrangement, the vendor agrees to keep a certain amount of crucial parts and components in inventory to guarantee future availability, Ochroch said.

-- Terms and conditions such as these should be part of any good contract, Ochroch said, but they assume special significance in light of yesterday's merger, he said.

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