CYA: Using Contracts to Protect Your Company

CYA: Using Contracts to Protect Your Company Software licensing and hardware contracts are a primary tool in protecting your company from vendors that you have purchased product from and do business with. In an ideal world, vendors work well with your companies representatives and when issues arise they are handled to meet both parties’ needs. Unfortunately, we don’t always exist in this perfect world. When conflict arises, sometimes the best interests of both parties cannot be met. This is why it is essential to protect your company by negotiating, redlining, and modifying contracts to ensure your best interests are met. A good contract will meet your company’s present needs and ensure the vendor provides you with an acceptable product, service, updates, and support. A good contract will also protect your company’s financial interests. A great contract will meet your company’s present and future needs and protect you from unforeseen changes in your company structure or the vendor’s company structure. You may think the difference between a good and great contract deals only with timeframes on the terms and conditions, but have you considered what happens when: 1. Your favorite vendor is purchased by worst vendor 2. Your company is acquired by someone else 3. Your company restructures or spins off operational units and your assets must be split between the new units 4. Your company goes through bankruptcy 5. Your company changes priorities and no longer needs software, hardware, or services that you have under contract for years to come These are just a few examples of unforeseen circumstances that you might not have considered when negotiating contracts with vendors. A great contract allows you minimize the financial impact when your business changes or the vendors business changes. There are many good ideas on how to protect your company’s interest and provide flexibility in contracts. Below are some ideas on structuring contract terms and conditions to provide you with flexibility to handle unforeseen changes and protect yourself. If you haven’t read the article Software | Hardware Licensing: Key Contract Terms, now might be a good time. Some of the following suggestions are largely based on terms presented and defined in that article. Ownership of Data: If you are outsourcing an application or service, make sure your company owns the data. Also, make sure you have a clause that makes the vendor give you your data when requested no matter what. You don’t want an outsourcing vendor to withhold your valuable corporate data if you missed a payment. Consider negotiating a poison pill clause into software contracts. Such clauses would give customers money if the vendor is purchased. You probably will have a difficult time collecting the money but you can use it for leverage with the new vendor owner. Continue article - CYA: Using Contracts to Protect Your Company: Part 2