Forego the Escrow (because It’s All About the Data)

You’ll be hard-pressed to cheerily find a vendor who won’t agree to put their code in escrow for you, in case they go bankrupt, and laugh all the way to the bank when they do so. That’s because your average vendor knows that it’s no effort for them and useless for you. Why?

1. You probably don’t have software developers working for you, and have no ability to do anything with the code.
2. Even if you do have a couple of developers, who probably spend most of their time doing integration projects and not core development, they’re not going to be able to translate 1,000,000 lines of code — or more — and do anything sensible with it any time soon. It will be months, and maybe years, before they are fluent in the code.
3. If the software was remotely hosted, it will be a monumental effort to get a local copy compiled, linked, loaded, configured, hooked up, and populated with your data. Monumental. Especially if you need a recent version, because you have no idea how to do this and neither does your team. You could be facing months of downtime before you figure it out, if you ever do.
4. Even if you half an IT team with a few competent developers, there’s no guarantee that the escrow code-base is going to be up-to-date (many vendors never update the escrow code-base because they know you’ll never check if they do) or that it’s going to contain the documentation you need to make sense of it, if it has any documentation at all!

You’re only safe if you have a stable application installed behind your firewall that your team, or third party system integrator, can maintain or if you’re using an on-demand application that could easily be replaced with one or more competitor products at the drop of a hat.

What you really need is a data availability agreement which allows you to get a complete extract of your data in a neutral format (like XML or CVS) at any time, and guarantees that you will get a complete data extract within 24 hours if the provider stops supporting your product at any time for any reason. That way, you can just switch to a competitive on-demand solution, load up your data, and keep on truckin’.

Is it Software or Service?

Many software products aren’t really software products at all. In other words, there is some incantation that has to be performed by the software vendor, in the form of services, configuration, or other magic, on a regular basis, to keep the software running. In this case, you haven’t bought software, you’ve bought software plus services. What’s even worse is that you’ve single-sourced it. If the vendor goes broke, or can’t deliver, you have no options.

Always ensure that you can procure services from multiple third party vendors, not just from the software vendor. Even better, make sure that whatever magic process the software vendor is performing can be easily transferred to your own staff. If there are special tools that the vendor uses, insist on owning them yourself. If the vendor cannot provide them, or is unwilling to train your personnel to use them, then find another vendor — fast.

Read the Contract

Don’t Be Fooled By the Presence of an SLA

The majority of Service Level Agreements (SLAs) are designed for one purpose — and one purpose only — to give you a false sense of security that will cause you to overlook the fact that the wording insures that the vendor will be able to keep your money for the length of the contract, no matter what. Your average SLA will run for a dozen or more pages with lots of fancy wording around “Level 1” problems, “Level 2” problems, and so on with detailed text spelling out your responsibilities and consequence-free reprieve time for the vendor while you lodge your complaint and fill out the necessary documentation.

When you take out all the superfluous text and boil it down to the essentials, you quickly find out that your average SLA is toothless and promises very little. While there may be a process for every issues that could arise, the language will always be sufficiently vague that a lawsuit couldn’t be filed, as a case couldn’t be won, nor would it be worth your while to do so. And it’s a waste of time to argue it, as your vendor’s attorney’s will be just as good as yours, and for every point the vendor’s attorney concedes, he’ll introduce two more that could be used to screw you even worse in the long run.

The ideal SLA, and the only SLA with value, is one that allows you to terminate the contract at any time without leaving any money on the table under a pay-as-you-go kind of contract. (That’s why SaaS solutions can often be the best value for your money as many SaaS vendors will allow you to go month to month after a minimum period of time.) This is the only SLA that counts as the vendor understands that unless it keeps delivering a quality product backed by quality service that earns your business, your business is something it might not keep. There is no stronger incentive to a vendor than your ability to walk away.

There’s No Such Thing As A Free Lunch

Free modules? Free support? Free training? Not likely! Either it’s included in the price, is being offered as an enticement to lock you in for a fixed term, or it’s being offered in an attempt to divert your attention away from a complex SLA that benefits the vendor and not you. If you want the extra module, extended support, or training, offer to buy it a-la-carte instead. Anything that ties your hand contractually is not only not free, but very, very expensive — especially if it locks you into a long term commitment to a solution that doesn’t deliver the results you expected.

Don’t Get Fooled by the License Fee in Disguise

Many traditional enterprise software platforms have a clause buried deep in the SLA that requires you to pay the annual maintenance fee, or lose the right to use the software altogether even though you have years left on the contract. That’s not a maintenance fee, that’s a license fee. Make sure the maintenance fee is a real maintenance fee for support and bug fixes. If you’ve licensed the software, and paid six or seven figures to do so, you should retain the right to use the software for as long as you desire, even if such use doesn’t come with free assistance.

Don’t Get Screwed By The New Release

As sure as the sun rises in the east, the vendor will come out with a new release not long after you’ve bought the current version and expect you to pay a large tranche of money to get it. You may get offered a small “upgrade” discount, but you’ll pay, then pay again, and pay again, and again for as long as you own the software. If you can’t do business with a vendor that simply charges you a fixed, steady, predictable monthly rate for the software — with no surprises — consider at least going with a vendor who will fix the price of the upgrades up-front. At least you’ll be able to plan for the expenditure and know up front how much the software is really going to cost you over its lifetime.