Do What You Can and Move On - Don't Sweat a Recalcitrant Stakeholder Forever

We've all heard the phrase "good enough for government work", usually uttered sardonically these days. Most people don't realize that the phrase originally referred to the high standards required for government work - work that was good enough for the government was work that met the highest standards. (I bet you didn't know that!)

I use the modern, sardonic variation: sometimes you should aspire to quality that's good enough for government. In other words: don't let the perfect be the enemy of the good.

Do I mean cutting corners on critical due diligence efforts? Do I mean failing to negotiate a good deal for your company? Of course not! What I mean is: don't hold up a purchase by sweating every minor detail, amplifying small issues beyond their actual importance, or stressing over a difficult stakeholder.

Suppose, for example, you're considering a new market research vendor to support your financial services consultants. The practice head for asset management consulting has indicated you need a new fund flows vendor. You already know the space pretty well, have met with and vetted the leading providers in the space, and are ready to make a recommendation.

The problem is, you only have buy-in from your Asia and US practice teams. You have been trying to get people in Europe and Canada to participate -- their commitment would scale the costs of the purchase substantially (lowering your unit costs), and you know -- you just know -- these teams are going to want the content eventually.

But you just can't get your potential users to do the work. Frustrating!

What to do? Two options:

1. Move ahead with just the Asia and US content, knowing you've done your best to achieve maximum buying power;
2. Make an executive decision to buy the EU and Canada content anyway. 

As a rule, Option 1 makes the most sense and is the least risky approach: it's almost always a fraught endeavor to purchase product you don't have explicit buy-in for. Even if you know the stakeholder could use the content, you're operating with limited information - you may not have visibility into their budget situation, for example. The last thing you want is to have to book the expense on your books or answer awkward questions from the CFO! 

The exception is a small, low-impact contract that's unlikely to raise eyebrows - an amount under a given spending threshold, for example. Perhaps you're looking at a trade publication that is segmented by sector - you know all the sectors will be useful but haven't heard from the Shipping team and you need to get the contract done asap. The incremental cost is $2K - well within your spending authority. Go ahead and add it! 

Before proceeding with a purchase that excludes content you know you'll need, try these steps to get the missing stakeholder to participate: 

1. Give the recalcitrant stakeholder a hard deadline and tell them their chance to get access to the content will pass for a year (length of contract);
2. Explain to management that you'd love to get additional buy-in but haven't been able to. Demonstrate the lower unit costs that you're missing out on - perhaps they can reach out to the stakeholder on your behalf;
3. Enlist the vendor. This is hit and miss. Sales-people can be annoying and you don't want to needlessly irritate your stakeholder. But salespeople while occasionally annoying can be effective - they may be able to demonstrate the value when your efforts have stalled. 

Once you've taken these steps and alerted management, go ahead with the more modest purchase. You can't keep the business waiting forever! And yes, you will likely have to expand the contract later - when the additional stakeholders get their acts together. Such is life as a contracts manager! 

- Kevan Huston

Nothing is Written in Stone. You Can -- and Should -- Negotiate Legal Terms with Vendors

What man can create, man can change. Vendors aren't G-d and you aren't Moses!

When it comes to contracts there's nothing written in stone. This is a phrase I use often when working with vendors and business stakeholders when negotiating contracts. With very few exceptions such as stock exchanges, you can change legal terms and conditions in a contract to your liking. Yes, you will need to negotiate hard to get some changes, like a cap on damages, while others probably just require asking - like a mutual indemnity clause.

Many vendors will present T&Cs as though they are, in fact, written in stone and descended from Mt. Sinai. Don't believe it. Everything is on the table.

Think about it: if vendors are willing to negotiate commercial terms, why wouldn't the same apply to legal terms?

Ideally, your firm has contract policies set by the Vendor Management Office (VMO) that govern what the firm will contract to. You can point to these policies to make negotiation easier. You'll also find contracts with some smaller vendors that are out of compliance with GDPR or other regulations. Of course, the bigger your firm is, the more purchasing power you have and the more likely you'll be able to tell the vendor your legal requirements are "take it or leave it". But with some persuasion you should be able to get some movement on legal terms that seem onerous, overzealous or carry undue financial or reputational risk for you as a buyer.

Below is a list of common legal terms that you and your legal counsel should pay careful attention to before signing any contract.

• Assignment
• Breach 
• Cap on Damages 
• Confidentiality
• Dispute Resolution
• Indemnification
• Jurisdiction
• Privacy
• Use of Data
• Waiver

Make sure to ask the vendor to send the contract to you in Microsoft Word so you can "redline" the paperwork and submit your modifications in a traceable format. Your staff attorney or outside counsel will be well-versed in such a process.

The above information is not intended to be legal advice. Consult a competent attorney before signing any contract on behalf of your firm.

- Kevan Huston

I Didn't Ask for Nautilus Machines. Why Am I Paying for Them?

Do you enjoy seeing your gym membership go up 20% after the gym "invested" in a whole new set of Nautilus machines when you only use free weights?

Yeah, me neither.

One of the more frustrating aspects of negotiating a renewal with a market data or information services vendor is the Service Enhancement argument which goes something along the lines of:

"As you look at your investment for next year, we'd like to highlight several additional content sets we've added to your service".

There's so much wrong here.

I am being asked to pay for services I didn't actually contract for. IOW - the value of the service is based on the composition of the service when I subscribed to it. The notion that it's now "worth" more because a vendor added services I didn't ask for (and for which I haven't established a value proposition) is unproven at, and at worst, disingenuous.

Particularly galling, of course, is when a vendor tries to justify a price increase based on service enhancements that haven't even taken place yet.

Push back on these arguments. How? Point out that:

1) I didn't ask for the service addition and my value proposition is based on the product without the enhancement;
2) I have no way of establishing the value of the new service, particularly if it's one promised and not yet actually released.
3) Even if, as vendor-supplied data suggests, it was used by subscribers, this alone is unpersuasive: we didn't market the enhancement internally, train users on it, or otherwise systematically calculate an ROI for it.

For claimed service enhancements during your current contract period:

Tell your vendor you're happy to look at it on a trial basis, and require they ring fence access to the service to select pilot users so you can determine the actual value of the enhancement.

But the vendor will argue: the enhancements can't be carved out separately - they're embedded in the existing service.

Reply, that's fine, but how can I know what portion of product usage is based on these enhancements? When were they made? How can you claim there's provable value if the new service/content is commingled with the content set you originally contracted for?

Tell your vendor you're happy to properly consider the enhancements over a full contract period during which you can conduct a proper evaluation, and then pay more should it be worth it, but you won't pay for it for this renewal.

For service enhancements promised for the next contract period:

Absolutely put your foot down on this. Product development and go-to-market cycles are wildly unpredictable. A March release of an enhancement may well be pushed to July. The functionality may be limited or buggy.  You won't pay for a service that doesn't exist yet. You won't subsidize their product capex. Period. Would you take out a mortgage on a home that isn't on the market yet and pay interest on an asset you don't own? The notion is preposterous.

Pay for only what you need. Unsolicited product enhancements need to prove their worth before you pay for them.

- Kevan Huston

Manage Auto-Renewals The Easy Way: Cancel When You Sign

There's many a slip 'twixt a cup and a lip, says the proverb.

Even with the most robust renewals management workflow, you will always run the risk that a contract you want to cancel ends up auto-renewing.

You can automate your process almost end to end with contract management solutions like Icertis or Apttus, but invariably some papers actually need to be signed by a specimen of homo sapiens.

Things happen, papers don't get signed. A signatory is on vacation and can't be reached. A cancellation date was misinterpreted. And a $50K contract ends up renewing, even though you don't need it and haven't budgeted for it.

Not good.

Two things I do to prevent this

1. Strike auto-renewal provisions from contracts. Vendors will object, saying they're "standard". Push back. The only reason a vendor wants an auto-renewal is because they're counting on you to forget to cancel. Auto-renewals lower churn and increase recurring revenue, simple as that. If a vendor won't budge, limit the notice of cancellation to 30 days from the end of the then current term and add a clause requiring you get 60 days notice of renewal with renewal terms (pricing).  That gives you 30 days to digest the renewal offer before deciding to renew. 
2. Serve notice of cancellation when you sign the contract. If you really must sign an auto-renewal agreement, simply submit what I like to call pre-cautionary notice of cancellation when you send back the contract. On your cancellation notice, make sure you reference the Order Form and all agreements incorporated therein, including document name, date, number (if available), and signing officer.  Make sure the same person who signed the contract also signs the notice of cancellation. You can have them do it when they sign the contract. 

There are caveats. Do you have favorable terms in your contract that might be at risk if you cancel? Things like a CPI cap on price increases? Of course, a vendor can always try to force you to repaper with terms that strip out price increase caps, but an auto-renewal feature might help grandfather you in, and make you less of a target for renegotiated terms. 

If you take an aggressive approach to auto-renewals by cancelling when signing, be prepared for feigned offense from your counterparty. Don't be cowed. Auto-renews have the potential to play havoc on your budgeting. 

- Kevan Huston

Are Enterprise Subscriptions Worth it?

Managers are often given the opportunity to contract for "enterprise" or "group" level subscriptions to web-based resources like MergerMarket or Pitchbook.

These subscriptions at first glance appear attractive: there's no per user or flat-rate cost for each seat you use.

Suppose a vendor comes to you with two contract options:

Per-user: $150/mo. per user, no tiered pricing (each new user is $150 pro rata);
Group: $2,000/mo. for Group access. The Group has 20 people in it. That's $100/user per month!

It's a no-brainer: simple math tells you to take Option 2.

No so fast.

Not all your users in the group have roles that benefit from the service. You may provision each person with the resource, but how many actually need the service? And how many will use it? How often?

Let's suppose you have a time machine that allows you to zoom ahead a year and see how the product ends up being used. Your future data shows that while you may have 20 subscribers, only 5 people are front office, and of those, only 4 people used the service at least weekly.

Your data are telling you that of the 20 people licensed for the service, only 4 are meaningful ROI+ users.

So if you were on a per-seat license, you'd be paying $600/mo. versus $2,000 a month for the group license.

With Option 1 you're paying $150 a month per user for four active users. With Option 2 you're paying $500 a month per user for your four active users.

This analysis tells you to take Option 1.

Absent a time machine, what should you do?

My recommendation is to start small with a limited, preferably per seat, license. Your unit costs may be higher in year 1, but you will have good qualitative data on the utility of the service, and, using a service like Research Monitor or OneLog, you'll have quantifiable data on usage patterns as well. Word of mouth from subscribers will potentially drive interest from other members of the Group, thereby justifying a switch to a group license upon renewal.

Start small, force the vendor to demonstrate actual value, before you go enterprise.

And remember, you can always repaper a contract before the term ends! If it really looks like the ROI is there for a group license, renegotiate - nothing is written in stone.

- Kevan Huston