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What I Wish I Knew Before I Signed that Contract - San Antonio

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What I Wish I Knew Before I Signed that Contract - San Antonio

  1. 1. WHAT I WISH I KNEW BEFORE I SIGNEDTHAT CONTRACT LINES OF RESPONSIBILITY AND COMMON PITFALLS
  2. 2. TODAY’S SPEAKERS Gregory S.Weiss CEO GTW Management, LLC Blake K. Holman CIO / CSO St. David’s Foundation
  3. 3. KEY ELEMENTS OF A CONTRACT “Legal” “Both” “Business” Indemnification PaymentTerms / Milestones Term Warranties / Representations Termination Price IP Ownership / Residual rights Data Security / Security Compliance Scope of work / Services to be rendered Termination charges / fees Auto-renewal Marketing / Promotion rights Exclusivity / Non-Compete
  4. 4. WHAT MAKES FOR A GOOD CONTRACT? • COLLABORATION between Legal and Business • READ what you’re agreeing to • UNDERSTAND / CONFIRM what you’re agreeing to • NEGOTIATE what you don’t like in what you READ / UNDERSTAND • Be willing toWALK AWAY from the negotiations • MAINTAIN your contract after it’s signed
  5. 5. FINER POINTS OF NEGOTIATION • 2Tools – Knowledge and Leverage • You may not to be able to improve your leverage; but • You can always improve your knowledge • Believe it or not . . . • Legal can (sometimes) help improve your knowledge!
  6. 6. ART OR SCIENCE?
  7. 7. DON’T FORGETTHE MAINTENANCE
  8. 8. SAMPLE COLLABORATIVE CONTRACT PROCESS • Business engages in initial negotiations • Business seeks Legal support: • After initial read of contract, while negotiations still ongoing • Legal review focuses on “Legal” areas, but confirms mutual understanding of all points • Legal can participate in negotiations, or simply review and confirm final draft of contract before execution • Consider bringing Legal in early if there are any disagreements or concerns after contract is signed (ideally before work is complete) • Could be informational only • Could be to assist with resolution
  9. 9. EXAMPLES • Enterprise-level HRIS – poor negotiation • Enterprise Cloud Storage agreement – effective negotiation • Services agreement for large financial institution – successful collaborative negotiation • AcquisitionTSA – effective collaborative process • Enterprise-level ERP system – poor maintenance
  10. 10. ONE – POOR NEGOTIATION • Business operated independently of legal in negotiations • Scope of work was “understood”, but not clearly defined – very general • Payment milestones equally vague • Vendor failed to deliver what client expected – but, no clear breach of agreement • Legal involved only after vendor and client reached standstill – end result: • Led to over 12 months of frustration and rework • Client didn’t receive effective solution, and had to spend substantially more time and effort in implementation • Vendor didn’t get paid for over a year
  11. 11. TWO – EFFECTIVE NEGOTIATION • Started with standard language, pushed back on several points, prior to involving Legal • Bandwidth restrictions • Storage of data outside the United States at provider’s discretion • No liability clause for deletion (related to recoverability) • Unilateral ability to change vanity id on URL • Ability to market using our name without any consent • Clarity around service level (99.9%, on what basis) and Support hours (definition of local) • Renewal term same as initial term, rather than month to month • Successfully clarified / negotiated desired position on all but one point withVendor • Collaborated with Legal on final product to ensure both Legal and Business term requirements met
  12. 12. THREE – EFFECTIVE COLLABORATIVE NEGOTIATION • Financial institution had many specific requirements, including robust data security • Some “requirements” were unreasonable based on company’s technology configuration • Business and Legal collaborated beginning early in negotiations – end result: • They worked together to identify: • Key contract requirements • Capabilities of company • Effective work-around solution • Negotiations focused on making sure final agreement was consistent with the solution
  13. 13. FOUR – EFFECTIVE COLLABORATIVE PROCESS • TSA can be a critical component of any acquisition • Effective collaborative process – cross-functional collaboration across entire company • Designated leads from each discipline (including from target company) • Met regularly to identify and hone key dependencies • Each iteration viewed in light of existing business operations to capture essential services and appropriate pricing • Final agreement subject to regular maintenance through integration process • Regular, cross-functional meetings for extended period after closing • Follow up negotiations with seller, as necessary
  14. 14. FIVE – POOR MAINTENANCE • Business and Legal collaborated on contract negotiations • Result was specific and detailed agreement, with appropriate concessions on both sides • Payment milestones were specifically outlined and clear • Problems arose in implementation – company requested substantial customization • Vendor objected, declared milestone completed • Business did not collaborate with Legal until after it (reluctantly) agreed milestone was complete • Legal involved after payment dispute – end result: • Implementation substantially delayed (vendor ceased work) • Opportunity costs for both client and vendor were much higher • Negotiated settlement ultimately led to delay in date milestone deemed complete, but payment still required before solution was fully usable by client
  15. 15. Q&A Gregory S.Weiss CEO GTW Management, LLC Blake K. Holman CIO / CSO St. David’s Foundation

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