Keep Corporate Changes in Mind

Often we see an organization going through significant organizational or operational changes -- a merger, an acquisition or divestiture, a major restructuring, a reorganization of data centers or an IT outsourcing.

Such changes hold challenging issues of all sorts. But often overlooked until the last minute are the severely limited usage rights posed in vendors' standard IT contracts. When these come to light, the impact on the customer can be ugly. Contract "gotchas" that limit the user's rights to move, transfer or otherwise change how the vendor's products are used are an unpleasant surprise for the uninitiated.

Here's a common scenario: A customer wants to move, combine or reorganize data centers, or perhaps two companies have merged and are combining processing centers. But because the software license specifies that the software can be used only on a certain machine, or at a certain site, or by a specific corporate entity, the customer will be in breach of the agreement.

A "stuck" customer must then negotiate for broader usage rights with the vendor to regain contract compliance (also called begging). At this point, the customer is at the vendor's mercy and has no negotiating power, resulting in hefty costs as the vendor inflicts its "transfer fees" or other such tariffs (also called highway robbery). These fees aren't accidents; the vendor considers them an important revenue stream.

The sad thing, of course, is that this can be avoided or minimized by considering any major future operational or organizational changes when initially negotiating IT contracts. If that hasn't been done, customers should diligently review their IT contracts for issues and limitations pertaining to usage, location and upgrades early in the analysis phase of a change event.

Having done this, the customer can then factor any additional costs into the cost/benefit analysis of the anticipated change.

So once again, we find that a minimal amount of extra time spent negotiating anticipatory rights, remedies and flexibilities into a deal at the outset can save your assets in the future.

Shell Game

It seems my Dec. 6 column on software upgrade fees struck quite a chord with Roy Niemann, a database administrator at a high-tech firm in the Northeast. Roy had strong words (deserved, I'm sure) for several IT vendors' upgrade fee practices. Roy's company is even building some IT solutions in-house rather than exposing itself to vendor ploys and gotchas. (To review the column, check out my Web site: also had insights about a vendor that is famous for its "shell game."

Here's how he described it:

"They repackage maintenance packages so you're never really sure what you're buying. Further, they steadfastly refuse to negotiate a site license for medium-size companies like us. We're stuck paying [US]$350,000 maintenance fees every year that escalate up to 18 percent a year. We haven't even rolled out major pieces of our Internet [applications for customers] because of their extortion fees for seats on the Internet. Better yet, even though they have a sales office about five miles from our site, we never see a sales rep. When we do call for one to come in and talk to us he/she is a) incompetent, b) clueless or c) agenda'd with particular products to sell us. Is this any way to foster a relationship with your customer?"

I'm sure we all know the answer to that question. But Roy's company's dilemma is common. Small and medium-size firms don't bring as much firepower to the negotiating table or a brand name the supplier can exploit for public relations purposes.

So let's help each other out. If you represent a small or medium-size firm buying IT, let's hear your success stories. How have you gotten vendors to treat you fairly and follow up with good service? E-mail me your stories or tips, and I'll address some of them in future columns.

Hang in there, Roy. Help may be on the way.

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