Monday, July 16, 2012

Click-thru Agreements: Keeping Perspective

Your company has decided it needs a piece of downloadable software or to procure ‘software as a service’ available online.  Your purchasing department says they want to buy it from a website and gives you a 30 page print out of the online terms for review.  They’re just looking for a rubber stamp so they can order what they need.  You want to do your due diligence and read every word, thinking, “Seriously, 30 pages for to build a website?  These guys are morons.”  As expected, you find some things that aren’t in line with what you usually agree to, so you ask for an editable copy.  And that’s where it all starts to go wrong - the vendor says it’s non-negotiable, the procurement guy says they NEED this exact thing yesterday and you stand firm that you are Big Co, and do not agree to unfavorable terms.  EVER. 

What everyone needs is a little perspective.  Think for a minute about the vendor’s business model and where the product fits in with yours.  Is the product going to be a crucial part of developing your revenue stream?  Is it relatively easy to replace if something goes wrong with this vendor?  Is your vendor creating a bunch of custom, unique work just for you?  Does the vendor do the same for other customers? Or, is your order outside their normal business model?  All of this should frame your review of that click thru agreement.

Generally click thru agreements/online terms are appropriate where the product being sold is mostly cookie cutter, and the business model is based on high volume lower margin.  In these situations, it doesn’t make sense for the vendor to negotiate with you, no matter how big you are.   Odds are that even though you represent a multi-million dollar/multi-national corporation, you’re only spending a couple hundred, may a couple thousand dollars with this vendor.  The administrative costs of maintaining different contractual obligations for individual customers can’t be justified.

But, what if the software or services being purchased is critical?  The website may only cost a couple of hundred dollars a month all in, but it enables your company to gain a thousand times that in new business.  If it goes down, you’re out hundreds of dollars each minute.  Surely that’s the time to negotiate a good SLA with strict penalties for failing to meet them, right?  Wrong.  .  If you’re expecting a vendor to indemnify your lost business costs in exchange for $49.95 a month, you’re being unrealistic. If it’s that crucial, do it in house or have external redundancies.  Purely technically speaking, a website can be replicated and published with another service provider within 24 hours.   Most other click thru software or services are similarly easy to replace and/or not critical to the success of your business

None of this is to say that you shouldn’t look out for the best interest of your client.  However, with online agreements, that often means finding a more reliable vendor with terms that are more in line with your risk profile or committing to a higher spend with the vendor to justify the special treatment.   Keep a little perspective when reviewing online agreements; it will make your procurement guys think you’re a business partner and not just ‘the lawyer’.

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