Software contract negotiations; anticipate change and get protection

To engage in successful software contract negotiations, businesses must rigorously assess their needs and requirements, understand their providers’ strengths and liabilities, and anticipate change. Software contracts are often written to favour application providers and phrased in vague, high-level language that can make companies vulnerable to additional fees or fewer usage rights than customers anticipate. Introducing additional complications, change is the only constant in today’s IT environment. Mergers and acquisitions are the norm for companies and their service providers; business models, such as the progressive migration toward outsourcing and globalization, are continually evolving. Consequently, companies must approach contract negotiations as a strategic element of their business life cycles. After doing the necessary homework, a company might decide that a new, marginal or small application provider supplies the most-appropriate technology for its requirements. This presents the nagging question, “What happens if this provider becomes unable to abide by our service agreement, or worse, goes out of business?” As “insurance” against such a conundrum, customers are increasingly investigating software escrow agreements, wherein they have their software’s source code stored, either through the provider or a third party.

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