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Intangible, or just immeasurable?
Not surprisingly, the toughest things to negotiate are the toughest things to define. One of these was the cost of consulting. How many hours does it take to get from here to there? What if it takes more time -- a lot more time -- than predicted? We rejected both fixed price and open-ended estimates as not evenly sharing the risk. We agreed on language by which the less accurate the estimate, the less we paid per hour. We didn't want to overpay, and the vendor didn't want to work for free. Perfect.
Next on the toughest list were changes. Some software guys get very protective when anyone suggests their pride and joy can be improved. We promised to request changes only when necessary. Suggesting that we might want them to pay to alter perfection was close to heresy. "You want me to sacrifice my virtual flesh and blood, and you don't want to pay?!"
Now, what we should buy? We had more than 100 line items and 10 pages of supporting documentation. The basic problem: Nothing is simple. Take the question of how many users and how many licenses. Different applications have different ways of measuring users vs. licenses; end of the month user counts are different from midmonth. We risked overbuying licenses for the core system and underbuying for ancillary products. After a day of wrangling with these worms, you begin to feel your life force seeping away. And we still had maintenance costs to go.
Every contract will have a series of clauses that should go both ways, like the promises and penalties regarding confidentiality and termination of the agreement, but they don't start that way. Every ERP contract also will include clauses about training, conversions, services and warranties. Attorneys understand confidentiality and terminations but need help with IT stuff. They will say things like, "How would you describe bad training? How do you measure subpar software performance?" And the one we heard the most: "What does that mean?" These are memories that make my head hurt.
When we were done exploring the dark interior of the contract, we threw it back to our vendor's legal department. There is a difference between having a lawyer on retainer and having a legal department. The entrepreneur is motivated to solve your problems quickly, whereas the other seems to concentrate on puffery and procrastination.
Of course, the only good attorney is my attorney. When I saw that her annotated version of the original contract had as much text in sidebars as in the body of the contract, I asked her, "Why don't we just rewrite the contract?" She pointed out that a fresh contract could take the software company's attorneys weeks or months to review.
In the end it took almost two months to get to a final contract. As John F. Kennedy once said, "Let us never negotiate out of fear, but let us never fear to negotiate." This is true for negotiating with sovereign nations and software vendors.
And after negotiating with Baloo on an Alaskan river, I agree -- except when the opposing negotiator can eat you for breakfast.
Next: The contract is signed, and the work of planning and analyzing begins.
Les Johnson is CIO at North Coast Electric Co., a wholesale electrical distributor in Bellevue, Wash. To comment on this story, email ERPJourney@ciodecisions.com.
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