NET(net), Inc.


Understanding (Your) Technology by jigordon
February 3, 2009, 9:32 pm
Filed under: microisv, negotiation, process

Ken Adams recently posted about the destruction of confidential information that would otherwise be found on backup media. Beyond the discussion of suitable contract language is a conversation about a contract professionals’ understanding of the technology about which you’re drafting contracts.

The long and short of it is that you need to have a passing understanding of the technologies involved in any contract you’re reviewing. Why? Well first, it’s a requirement of the Five Fundamental Skills for Effective Negotiation (Information Gathering).  Second, assume for the moment that you are going to replace your network infrastructure from one manufacturer to another (these things happen more frequently than you’d imagine). To replace the existing technologies wouldn’t make sense without some amount of upgrades and network re-architecture (replacing old hubs with switches, etc). So the new vendor is offering a swap – hub for hub, switch for switch. Sounds good, right?

Before I tell you if it’s a good deal, what do you know about hubs and switches? Do you know how they work? Hmmm… that might not matter. It would help, however, to know how the devices are constructed. Hubs and Switches are physical devices that connect pieces of networks together. To do this, they have ports on them that accept ethernet cables… lots and lots of them. In other words, the value of a hub or a switch is not based only on whether it’s a hub or a switch (switches are more expensive), but on how many ports it has. So in this particular situation, you don’t just want a like-for-like swap, but also a port-for-port swap, otherwise, you could be giving up money without even knowing it.

Now, this issue also comes into play when you’re negotiating with smaller software vendors (called mISV’s – micro Independent Software Vendors) who sometimes sell software of a smaller dollar amount.  The mISV is quite sensitive to the costs, time and effort needed to work through their license agreement.  In fact, there’s a discussion going on right now over at Joel Spolsky’s Business of Software discussion boards on this very topic.  The mISV’s see the attempt at negotiation as costly and potentially harmful and their reaction is to tell the negotiator that no changes are allowed (they even use EULAs as a way to say it’s a non-modifiable form).

If you’ve taken the time to understand the product/service, there’s a chance that you won’t have to make a sweeping amount of changes to the document.  So, for example, if the product is a small desktop-based (non-networked) product, that doesn’t use ANY network resources (no internet access, for example).  Then I can relax my standards just a bit because now, if the product breaks, the likelihood of it taking down our network in the process is smaller.  So rather than lots of changes to their EULA, I will work with my legal and business folks to agree to only make two changes to the document:  1) Insert a warranty for exactly what the product does/not do – ie: no network access, doesn’t transmit anything, wholly desktop contained, etc; 2) Make the mISV liable for damages only if they breach this warranty.

In this way, I’ve lowered our risk, and I’ve only really made it risky for a deceitful mISV.

Oh, and while you hopefully have a subject matter expert hanging around to help you… you can’t count on them understanding the language enough to know to even ADVISE you of this issue. Because chances are they will make two fatal errors: 1) They believe what the vendor tells them, and 2) Absent blind faith in the vendor, they will also believe that technical people are all on the same page and that it’s only LOGICAL that the swap would be port-for-port.


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