It always amazes me how much the deck is stacked against hapless software buyers. Along with fear, uncertainty, and doubt, dishonest software salespeople use everything from insane product discounts to abusive strong-arm tactics in an effort to get the deal sealed and the quarter closed. But even a cynic such as myself was amazed to find out how deceptive software contracting practices can be and how easy it is for poorly informed software buyers to think they're getting a deal, only to find out they're heading for the cleaners instead.
How bad is it? Software contracts, as procurement executive Lloyd Rain noted recently, "are the most convoluted, obfuscated, totally unintelligible type of contract on the planet…. None of us, no matter how smart we may think we are, are really qualified to delve into their intricacies."
Sound all too familiar? Here are a few of my favorite vendor contracting tricks, culled in part from experts such as Rain and my friends at Net(net), a software contract negotiation firm that, luckily for many of its clients, is actually smart enough to understand the convoluted, the obfuscated, and the totally unintelligible.
The hidden time-and-materials clause. The customer buys a data warehouse system and discovers, after the fact, that a footnote in the contract contains a hidden requirement for additional—and open-ended—time-and-materials charges to build the operational data store that is needed to actually make the data warehouse work.
The stop everything and audit clause. The customer thinks it has a binding arbitration agreement regarding dispute resolution. But the fine print reveals that the vendor can assign an "independent" auditor to audit the customer's usage and actually prevent the customer from using the software until the audit is completed and the results verified.
The desupport penalty clause. The customer thinks it can cancel the support contract at will. That is technically true, except that the vendor's penalty for reinstating support can cost more than the entire license.
The desupport, no-penalty (for the vendor) clause. The customer thinks the vendor has committed to a fixed time period for supporting a product. Sure, until the vendor changes its mind, at which point support ends whenever the vendor says so.
The repricing clause. The customer thinks it got a good deal on the license price, only to find that the vendor has been bought by another company, which now thinks the deal was too good for the customer. The new vendor raises the price of the contract and jacks the customer for additional maintenance fees.
Why do vendors do this? Because customers don't have the same contractual firepower the vendors have, because customers have complex and often conflicting reasons for buying a particular piece of software, and because customers simply don't say no enough.
So I encourage everyone to start saying no, hire a contracting expert, and start making this the partnership-driven "buyer's market" it is supposed to be. Vendors do this only because they can. It's time to show them who's really in charge.
Josh Greenbaum, principal of Enterprise Applications Consulting, has 20 years of experience in the industry as a computer programmer, systems analyst, author, and consultant. His column appears monthly.
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