For instance, providers often implement an I.T. system only to then find it does not have the processing speed envisioned. Speeds are always increasing, but that doesn’t mean that warranty language in vendor contracts has been updated to reflect faster speeds. Vendors create loopholes so they can say they have fast speed but really don’t, McKenzie contends. Another example: Social media is changing vendor support. If a system went down, a provider used to call the vendor by phone, but now a text message may be sent. Such messages, however, may raise privacy and security concerns that haven’t been thought about. So, as texting and other social media expand options for communicating with vendors, providers must decide which options are appropriate for them.
Another contracting issue McKenzie will tackle is that vendors research prospective customers, but the customers don’t research prospective vendors enough. There are simple things prospective customers should know that they don’t look up, such as when a vendor’s fiscal year ends, because that is when vendors are most inclined to give discounts to close a contract before year-end. Social media can play a big role in vendor selection. McKenzie recalls a client who used Facebook and LinkedIn to research a vendor and it quickly became clear that the vendor was growing too quickly and hiring in a frenzy. In another case, a vendor CEO posted on his LinkedIn page that he was retiring at the end of the year, a development the prospective customer had not been told.
As the technologies get more complicated there is an older legal clause--the Ancillary Services clause--that is becoming more important than ever to put in contracts, McKenzie advises. In essence, the clause tells the vendor: “We don’t know everything, so will assume you are including everything else logically connected to our contract.” And that clause is supported by a Cooperation clause that also should be in the contract, requiring the vendor to cooperate not just with the client but with the client’s other vendors on integration and other issues.
Too often, providers want to be buddies with the vendor. It’s nice to have a good relationship, but it is a business relationship and the contract should not be one-sided. That leads to the last impression that McKenzie hopes to leave: “It really pays to spend time negotiating your contracts. There’s a phrase that lawyers use: ‘Pay me now or pay me more later.’ Nice guys can finish last in negotiations. But if you have a really good contract, you may never have to look at it again.”
Education session #21, “Trends in IT Contracts,” is scheduled for 11 a.m. on March 4.