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Demystifying IT Contracts Terri-Lynn Thayer Executive Director Computing and Information Services Brown University NERCOMP, March 2004 Copyright Terri-Lynn.

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Presentation on theme: "Demystifying IT Contracts Terri-Lynn Thayer Executive Director Computing and Information Services Brown University NERCOMP, March 2004 Copyright Terri-Lynn."— Presentation transcript:

1 Demystifying IT Contracts Terri-Lynn Thayer Executive Director Computing and Information Services Brown University NERCOMP, March 2004 Copyright Terri-Lynn Thayer This work is the intellectual property of the author. Permission is granted for this material to be shared for non-commercial, educational purposes, provided that this copyright statement appears on the reproduced materials and notice is given that the copying is by permission of the author. To disseminate otherwise or to republish requires written permission from the author.

2 Presentation Overview General Concepts General Concepts Hardware Purchase/Lease Hardware Purchase/Lease Hardware Maintenance Hardware Maintenance Software License Agreements Software License Agreements Software Maintenance/Support Agreements Software Maintenance/Support Agreements Professional Services Contracts Professional Services Contracts Application Service Provider Contracts Application Service Provider Contracts

3 Who is responsible for IT contracts at your institution? IT Management IT Management General Counsel General Counsel Purchasing Purchasing Departments Departments

4 Things to consider Read the contract Read the contract Everything is negotiable Everything is negotiable Price is important but so are terms and conditions Price is important but so are terms and conditions Many of the contracts you negotiate will outlive you at the institution and your salesperson at the vendor organization Many of the contracts you negotiate will outlive you at the institution and your salesperson at the vendor organization The contract forms the foundation of your vendor relationship The contract forms the foundation of your vendor relationship

5 Other general tips Jurisdiction Jurisdiction Change it to your state Change it to your state Warranty Warranty This is a tough one This is a tough one

6 Hardware Contracts Purchase vs. Lease Purchase vs. Lease Property tax concerns Property tax concerns $1 buyout lease $1 buyout lease You own the equipment for $1 at end You own the equipment for $1 at end Title passes at inception Title passes at inception Hardware maintenance contracts Hardware maintenance contracts Service level agreements Service level agreements Support level definitions Support level definitions Make it an exhibit to the contract Make it an exhibit to the contract

7 Software License Agreements Perpetual use vs. lease Perpetual use vs. lease Do you have the right to use the software into perpetuity….even if you stop paying maintenance? Do you have the right to use the software into perpetuity….even if you stop paying maintenance? Licensing models Licensing models Campus site license – your entire campus can use it Campus site license – your entire campus can use it Server/processor based – only on the specific machines or number of processors Server/processor based – only on the specific machines or number of processors Application specific – only for this specific application Application specific – only for this specific application Named user – only these specifically named users Named user – only these specifically named users Concurrent user – no more than a specified number of users at any one time Concurrent user – no more than a specified number of users at any one time

8 Who counts Faculty, Staff, Students Faculty, Staff, Students IPEDS IPEDS Self reporting Self reporting FTEs vs unique individuals FTEs vs unique individuals Hospital based staff Hospital based staff External users External users Define them - Alumni, prospective students, prospective job applicants, anonymous Define them - Alumni, prospective students, prospective job applicants, anonymous Is their use allowed in your agreement? Is their use allowed in your agreement? How are they counted? How are they counted?

9 Software License Agreements Software Escrow Software Escrow Guard against the unfortunate situation of your vendor going out of business Guard against the unfortunate situation of your vendor going out of business Some vendors will ask you to pay the fee, it is often worth it Some vendors will ask you to pay the fee, it is often worth it Who can see the code? Who can see the code? Some contracts limit you to only your own employees Some contracts limit you to only your own employees If you plan to use consultants make certain this is allowed per your contract If you plan to use consultants make certain this is allowed per your contract Resold products Resold products What are the license restrictions? What are the license restrictions?

10 Software Support/Maintenance Agreements Flat rate over a period of years Flat rate over a period of years Escalation caps Escalation caps Most of these agreements dont allow you to drop products mid-term but do allow the vendor to sunset products Most of these agreements dont allow you to drop products mid-term but do allow the vendor to sunset products Be certain that you will want to maintain these products for the full term of the agreement Be certain that you will want to maintain these products for the full term of the agreement Build in language that specifies whether the vendor can sunset products and if so, what the remedy is to you e.g., substitution of products, custom support Build in language that specifies whether the vendor can sunset products and if so, what the remedy is to you e.g., substitution of products, custom support

11 Software Maintenance Agreements continued Auto-renewal clause Auto-renewal clause Re-initiation charges Re-initiation charges In some cases you must re-purchase the product In some cases you must re-purchase the product Other contracts include penalty/premium fees for reinstatement Other contracts include penalty/premium fees for reinstatement What are you paying for? What are you paying for? Product fixes Product fixes Product enhancements Product enhancements Help line access and number of technical contacts Help line access and number of technical contacts

12 When should you renegotiate your contract? When you have leverage When you have leverage At least a year before it ends At least a year before it ends When you are buying new products When you are buying new products Not necessarily when a vendor is acquired Not necessarily when a vendor is acquired Make certain you dont lose any of the gravy in your existing contract Make certain you dont lose any of the gravy in your existing contract Some contracts have balloon payments up front and gravy years towards the end of the term Some contracts have balloon payments up front and gravy years towards the end of the term

13 Professional Services Contracts Types Types Implementation Services Implementation Services Training Training Staff Augmentation Staff Augmentation These contracts are often the most challenging These contracts are often the most challenging Terms and conditions are especially important Terms and conditions are especially important Try to plan for the unimaginable Try to plan for the unimaginable

14 Fixed Price Contracts Vendor is assuming risk for delivering on-time for a pre- determined fee – there is a cost associated with this risk that is built in to their price Vendor is assuming risk for delivering on-time for a pre- determined fee – there is a cost associated with this risk that is built in to their price Deliverable definition, milestones, and dates are extremely important Deliverable definition, milestones, and dates are extremely important Build in penalties for late delivery Build in penalties for late delivery The scope statement will become the bible The scope statement will become the bible Have the change order process and associated rates very clearly defined Have the change order process and associated rates very clearly defined If you know the price is way too low then dont sign it If you know the price is way too low then dont sign it These work best when there is established win/win These work best when there is established win/win

15 Time and Materials Contracts Flat rates Flat rates Skill/level based rates Skill/level based rates Statement of Work Statement of Work Be as specific as possible about what the consultants will be doing and your quality expectations Be as specific as possible about what the consultants will be doing and your quality expectations Consider approval periods and processes Consider approval periods and processes

16 Professional Services Contract Issues Insurance/Liability Insurance/Liability Will the consultants be providing service on- site at your campus? Will the consultants be providing service on- site at your campus? Workers Compensation Insurance Workers Compensation Insurance Liability Insurance Liability Insurance Data Security Data Security Gramm Leach Bliley provision Gramm Leach Bliley provision Protection of other vendors product copyright Protection of other vendors product copyright FERPA FERPA

17 Consulting Contracts You should have the ability to approve and replace any consultant for any reason You should have the ability to approve and replace any consultant for any reason Specify consultants by name if they are key Specify consultants by name if they are key Consider removing non-proselytizing clause Consider removing non-proselytizing clause Travel Travel Are travel expense included in the rate? Are travel expense included in the rate? Provide some description of the allowable expenses e.g., midsize car rental Provide some description of the allowable expenses e.g., midsize car rental What about travel time? What about travel time?

18 Application Service Provider (ASP) Contracts Service Level Agreements Service Level Agreements Guaranteed uptime Guaranteed uptime Indemnification Indemnification flawed business practice versus a software problem flawed business practice versus a software problem Technical support and Help Desk support Technical support and Help Desk support Software Escrow Software Escrow

19 ASP particulars Data backup and recovery Data backup and recovery How frequent How frequent Where stored Where stored Recovery service expectations Recovery service expectations Data security and privacy Data security and privacy Gramm Leach Bliley Gramm Leach Bliley Data destruction at termination of agreement Data destruction at termination of agreement Security incident response handling details Security incident response handling details Intrusion Detection measures Intrusion Detection measures

20 Questions


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