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Book and Serial Acquisition Conference Talking Points: Negotiating with Vendors 5 November 2008 |
- I am very pleased to have this opportunity to be part of this impressive panel. I appreciate the opportunity to speak with you today about some of the processes and pitfalls to consider from a legal perspective when negotiating agreements with content providers.
- Lawyers get paid to look at things differently than you or your vendor's sales reps do. Their primarily responsibility is to protect their clients or the enterprises they serve.
- It is from this vantage point that I am going to talk with you today about negotiating agreements.
- I recently came across a quote that offers great insight into the negotiation process and I would like to read it to you. "The two keys to negotiating are... superior information and learning to smile and say, "no, no, no, no, no" until your tongue bleeds."
- For a long time...that was how most people approached negotiation. It was a zero-sum game. In order for me to win...you had to lose.
- Most of us now recognize that this approach has some real shortcomings. It is kind of like using a hammer to kill the mosquito that just landed on your arm. You may get what you were after . . . but at what price? The same can be said of zero-sum negotiating.
- Most of us don't give ourselves credit for our negotiating skills. But think about it: we are all involved in negotiations every day . . . at home, at work, and in conducting the business of life.
- The trick is to look at things from the perspective of the other person--and make sure they get what they need while you get what you want. I promise: you have more experience with this than you think!
- Maybe you let your teenager use the car--if he cleans his room or passes that math test. Perhaps you have organized a carpool to save money on gas. All of us engage in win-win negotiations all the time.
- As information professionals in the growing digital economy...you are expected more and more to negotiate license agreements and other transactions for the acquisition ...management...and dissemination of external information and data.
Whether you are negotiating for an enterprise search engine . . . or for access to digital resources . . . or are purchasing taxonomy software or a content management system . . . you have what it takes to reach agreements that are beneficial to both you and your vendor . . . agreements that will also make users, your lawyers, and any other stakeholders happy.
Even though librarians and info pros are part of a 400 billion dollar-plus industry...it sometimes seems like we know a lot of those working in the industry personally. As a result...the relationships you build with your providers are a little like those in your personal life--occasionally difficult but always necessary.
And with so many mergers in the content business, you may find yourself negotiating a greater number of agreements with a smaller number of vendors . . . making each of those vendor relationships more significant.
These are hard economic times . . . and if your budget is shrinking at the same rate as my retirement investments, you may be tempted to drive a harder bargain.
But remember: you work with the same people again... and... again ...and again. Relationships matter. You will probably be working with them to schedule training for your users. You may require their help to solve problems or address additional, unexpected needs that arise. I hate to go to a person I have just made angry to ask for help--how about you?
Do not be embarrassed to discuss the budget realities behind your purchasing decisions. The same industry mergers may give your vendors solutions they did not have before. We are all operating in the same economy, a fact that tends to keep the playing field level.
Remember...it is in your best interest to come to an agreement that satisfies everybody. You don't want to be like the guy who, in the course of a labor negotiation, had to lean over and say, "Would you mind screaming that again?" - However . . . Even though you may eventually be sitting around a campfire singing Kumbaya with your new best friends...you should go into any negotiation with a clear sense of what you want...what you believe you can realistically get....and what you are willing to give up in order to get it. No lawyer worth his or her salt would go into a negotiation without a well thought-out strategy in mind...and neither should you.
Your goal is to reach an agreement that eliminates all disputes and reduces the likelihood of misinterpretations ... gives you the best deal you can get given your bargaining position... and satisfies both your needs and those of your vendor.
- Let's say...you have accomplished your goal. I would like to take a few minutes to talk about what happens AFTER you reach agreement in principle with a vendor and are ready to commit the details to writing. This is where the next set of negotiations begin ...between you and your organization's legal department. And you want this to be a win-win situation, too.
It may help to look at things from your legal department's perspective. You may have a lot at stake in the outcome of an agreement...but your legal department has even more. The lawyers are ultimately responsible for the terms of any agreement and for the legal language that could commit your organization to millions of dollars. When they look for every worst-case scenario imaginable . . . well, they are doing their job.
They want your organization to succeed and flourish ...just as you do...but their job is to scrutinize every detail in the agreement for anything that could lead to problems. - That is why I am going to give you a list of things I know your lawyers would like you to pay close attention to...no matter where you work or what kind of agreement you may be negotiating.
Before I tell you what some of these do's and don'ts are...a word of caution. Even though you may reach a tentative agreement with a provider on a license agreement or some other business arrangement...do not make any oral commitments. Some people believe that nothing is legal unless it is in writing...but that is not always the case. In some circumstances...a verbal agreement can be binding.
That is why it is extremely important that you couch any preliminary agreement as tentative until it has been put in writing and reviewed and accepted by your lawyers.
It is also important that you keep any literature the vendor gives you, along with your notes, so that you can be certain that the contract is consistent with your understanding.
Also keep notes on things that will probably not be in your contract--like an account plan that outlines the times when you and your vendor will touch base to discuss how the product is working out, both technically and in fulfilling your needs.
So what should you pay particular attention to when negotiating an agreement? From the perspective of lawyer...I suggest you pay close attention to the following seven legal issues. - First...make sure the agreement clearly describes what it is you are licensing or buying. The terms of the agreement should be clear and easily understandable, and you should be able to explain them in detail when asked.
In particular, you should know exactly how the content can be distributed--to whom, where and how--and whether or not the agreement includes all potential costs.
Even if you will be signing a standardized agreement...examine the document carefully. Law is not rocket science, and you are a smart person. Understand the agreement as well as you can before you send it to the lawyers for approval.
Confirm that any agreement you sign is between you and the content provider alone, and that it overrides any individual click-throughs by your users. Let me explain what I mean by that. You know how you are asked to click on a box confirming terms of use when signing up for a new online service or downloading software?
With some services your organization may purchase...users may still be asked to click on a terms of use button to download software in order to access a program. You want to make sure the rules governing each user are outlined clearly in the agreement and are not overridden by the terms of use button individual users may be required to click on.
And finally...check to see that the agreement has a provision describing the training your users will receive. - The second consideration lawyers will likely want you to pay close attention to is price. Is the price you are paying reasonable? More and more legal departments are being asked to render opinions on business decisions...as well as on legal matters.
You can help them by being prepared to explain exactly how the product or service you are acquiring will support your organization's overall strategic direction and information needs...how it will save time or lead to better decisions . . . and why the purchase makes good financial sense.
This may seem like a no-brainer, but to be successful here, you must be up to date on any changes in direction your organization may take in response to the economy. If development of a new product or service has been suspended, the need for information to support it may have gone away.
Also be sure that you understand what will happen after the initial term of the contract. Is there a cap on the cost of maintenance and upgrades after the first year? Will the contract renew automatically or not?
An aside on the topic of renewals . . . In preparing for this presentation, I talked to a number of vendors and buyers. It was very illuminating!
One vendor suggested that I advise you to beware of automatic renewals. Another vendor suggested that I advise you to demand automatic renewals.
So who is right? Probably both. The truth is that both options have their pros and cons. Automatic renewals may save you money--but it becomes your responsibility to take steps to be sure that the product is living up to your expectations throughout the term of the contract . . . and, absolutely, well before the contract is set to renew. Set up a reminder schedule . . . and think through how you will measure performance.
If the contract is not automatically renewed, there will be one less thing for you to remember to do. You know that you will have the opportunity to renegotiate. Understand, however, that there may be pitfalls. For instance, will the cost at renewal increase based on usage?
Usage can be measured many ways. I've talked to a librarian who discovered that her users were spending a tremendous amount of time with a particular product. She assumed that it was wildly popular and useful. Good thing she decided to check on those assumptions.
What she discovered was that she had a small number of users who truly needed the content available through this product to do their work. But the product was so difficult to use that each user was investing a great deal of time before ever getting to the needed content.
Armed with that information, she was able to renegotiate a contract that provided more training opportunities . . . without paying more for the content.
- Third...be certain that your rights to use the information you are licensing or buying are not restricted in a way that will limit their intended use in your organization. Think and ask: What restrictions could limit your users' ability to download... print...or otherwise disseminate the information? Could a third party restrict the ways you use their content? Also... does the agreement prohibit other uses that could be considered essential down the road?
For example...if an agreement limits the use of downloadable information to a single researcher... this may make any information the researcher finds useless. What good is the information if he or she cannot forward it to decision makers or use it in any strategic way?
Copyright law gives limited protection to owners of intellectual property. That is why some owners seek to strengthen their protections through restrictive provisions in licensing agreements. They are mindful of the fact that contractual agreements trump copyright law. - Fourth...the lawyers will be insistent that you have enough licenses to meet your current information needs and your needs in the future. Is there language in the agreement that explains how you would add more licenses--at favorable terms--without renegotiating the entire contract?
And what about system upgrades? It is extremely important from a legal point of view that you understand how changes in technology or in the scope of your business would be addressed. You want to ensure that you continue to receive the best information and value possible from your agreement.
- Fifth...most vendors will not allow you to break agreements willy-nilly--any more than your kid is going to let you break the agreement to borrow the car, after he has aced that test.
As a rule...the only way you can get out of a contract is for non-performance on the part of the vendor or in the event the content provider goes out of business. That is why you should insist on the right to test a product's compatibility with your organization's existing technology before any agreement takes effect.
You can do this before an agreement is negotiated--a 30-day trial is common. Or you can perform "acceptance testing" after an agreement with a vendor has been reached. Obviously...there are significant advantages to discovering a product's limitations or technical incompatibles before undertaking the time-consuming process of negotiating with the provider.
I suspect that most of you already conduct comparative trials of different product offerings you are considering...and have defined well in advance the specific criteria important to your users.
If...however... you are not including your IT Department in this process...you should. A look at the product through their eyes may save you a lot of heartburn later. They can bring knowledge and experience to the table that will help you understand the technical challenges that come with each solution--and whether or not they can easily be overcome.
And let's face it--who are you going to go to if you have problems? Give your IT people a stake in the decision, and they are far more likely to help you down the line. - Sixth...seek to define the vendor's responsibilities in preventing harm to your company caused by security breaches...viruses or other vendor-related technology incidents. Again...it would be wise to involve IT in this discussion. Also... determine the vendor's responsibilities...as best you can... if harm does occur.
- And...seventh...become as fluent as possible in the use of terms commonly employed in licensing agreements and contracts. This will not only help you make sure they are used consistently throughout the agreement...it will allow you to speak more knowledgeably with your lawyers.
For example...some of the terms you should become familiar with are...license...authorized use...concurrent use...authorized user...local access...simultaneous use... wide area network and NDA. I suggest you pick up a basic book on business contracts or discuss the subject with your in-house counsel for more information on these commonly used terms.
- In conclusion...you are not lawyers, and you are not expected to be. The key to win-win negotiations is simply to try to see things from your lawyer's perspective--as well as the perspectives of your users and your vendor. Make sure that you have taken into account the things that will make them happy . . . and, chances are, you will come out happy, too.
- As the roles of information professionals expand and you take on greater responsibilities...you will, no doubt, be expected to know more and more about negotiating complex content agreements.
Think of it this way. It is one more skill...one more arrow in your quiver...that will help you become indispensable to your organization.
Even though copyright law provides certain rights of use...any agreement you sign takes precedence and determines what you can and cannot do with the information you obtain.
Allow me to end with a story. Earlier, I gave an example of a win-win negotiation . . . a parent offering to let a teen use the car in return for doing well on a test.
A friend of mine actually negotiated this arrangement a few years ago. She let her newly licensed son use her car for a date after he passed a very difficult chemistry test.
Just as he parked at his girlfriend's house, it started raining cats and dogs. Being a responsible young man, he stayed inside his girlfriend's house until the storm passed.
But what did he find when he returned to the car? A giant tree limb had fallen on the car so hard it had knocked the air out of the tires. The insurance company declared the car a total loss.
Turns out, my friend had hated that car. It had given her nothing but trouble from the day she drove it off the lot. She had the excuse--and the money--to buy another car that she absolutely loves and is still driving.
She also told me that her son felt so bad about what had happened that he was the picture of good behavior for months. So this was a win-win-win-win situation.
If the thought of negotiating an agreement tends to intimidate you, remember this. You are more experienced than you think. Just remember to look for what is in it for the other guy . . . even when the other guy is your lawyer!
Thank you.
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