Changing a traditional critical business application is a major undertaking. But a move to cloud-based SaaS solutions can be even more complex. When negotiating contracts with your chosen vendor, there are a number of things to look out for, because you’ll be placing your trust in a third party to provide, and crucially, maintain a business-critical function.
Let’s start with the basics. In any commercial selection, you need to ensure your chosen product can fulfil your functional and non-functional requirements; that the vendor or implementation partner has a realistic and proven approach to delivery and support, and that the cost of product and implementation services is affordable and competitive.
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First and foremost; Capabilities. Can the Vendor/Partner demonstrate the skills, resources and established processes to deliver on all aspects of the implementation service, transition and associated managed service? Evidence need not necessarily be written into the commercial agreements or RFP responses, but the documentation associated with the agreement should reassure you that the Vendor/Partner has them.
Also, written into the main document, or its schedules, should be a commitment that the Vendor/Partner will provide the resources to deliver in these specific areas:
- Responsibilities: Who does what, in the realm of Implementation Services and Managed Services? What is the split of responsibilities between the Client and 3rd parties? How are services “backed off” between providers? To what standard must they do them?
- Redress: What is done to compensate for failure to meet the responsibilities to the required standard? Not necessarily punitive, but it is there to give the responsibilities that can be called to account, full accountability. In the end, the objective is to get the services as specified, under normal operations or get Recovery in the shortest time.
- Recovery: In the event of catastrophic or chronic failure, what special measures will be exercised to get delivery back on course? This could for example include “carve out” of some, or all of the service(s) to a 3rd party, at the expense of the Vendor/Partner.
- Exit: What is “Plan B”? The Vendor/Partner must have a project plan and defined responsibilities to facilitate your exit from the engagement in the event of commercial necessity, failure of the relationship, (including termination for cause) and normal end-of-term without renewal. (Note: it would be usual for the vendor to levy a separate charge for the service at the time of invocation.)
All parties need to know the consequences of failure and to understand their obligations so openly addressing redress, recovery and exit from the outset provides mechanisms that can be invoked in the event of significant problems along the way. Having these transparent to everybody and agreed upfront creates a more “grown up” and collaborative environment for successful, long-term partnering.
With the recent fall of Sterling against the Dollar, extra-commercial considerations have arisen in relation to services delivered by US-based providers. Anyone considering a move to the cloud may want to look at strategies to protect themselves from future exchange rate fluctuations. For significant spend, then currency hedging is an option any business with significant income or overseas spend would probably consider. If individual contracts are in foreign currency, then you may have the option to fix rates and/or increases for an agreed period. However, this depends where you are in your contracting cycle – beginning, renewal, etc. Your negotiation leverage will vary; think through the various scenarios:
- What happens if the exchange rate continues to weaken?
- What happens if there’s a significant upturn back to previous rates?
- What if we trade longer commitment and/or stricter termination clauses for a negotiated rate?
- What happens if we add more/less subscriptions, in the above events?
- What happens at the end of the current/renegotiated term?
- What happens if we cancel?
By thinking through these situations, you will be able to assess your negotiating strength and the risks/opportunities you can afford to take.
It should be stressed, though, that the falling pound is not a reason for keeping services on-premise. All the reasons for evaluating cloud vs hosted vs on-premise that were valid before the fall in Sterling still apply. Recent events have just served to highlight one of the many commercial, technical and functional considerations/risks that need to be thought through before undertaking any significant business applications or technology investment.
Featured image credit to Lobster.media