Tech stacks and Service as a Software contracts (Saas) are a growing area of risk and dispute for all businesses. If your business depends on data, software and tech support to operate efficiently and effectively, it is worth undertaking a health check of your key contracts, assessing how the tech is performing, and reviewing your future plans.
These types of services are particularly predisposed to:
- a disconnect between sales and after-sales support divisions;
- scope change and unexpected costs; and
- variable performance and changes over time in personnel, capability and responsiveness.
In addition, technology service contracts are commonly drafted to heavily favour the service provider.
Instead of facilitating business success, they can quickly become a source of disappointment, friction and vulnerability.
The common complaints that trigger disputes include:
- ‘The product we bought doesn’t do what was promised’
- ‘There is additional cost for modifications (to do what was promised)’
- ‘After implementation, the price has increased exponentially’
- ‘We don’t get adequate customer support’
- ‘Our provider has restricted access to data because of our complaint’
- ‘Our provider will not assist with migration to our new provider’
Unfortunately, provider-friendly contracts provide little commercial leverage to their customers to have such complaints addressed. The service failures (and subsequent customer support failures) can quickly build up over time and erode the trust which is essential to a healthy business relationship.
In one instance, when a customer sought to migrate a service, the service provider effectively held health-related data to ransom for additional payment, despite knowing that it would impact on clinical treatment of vulnerable patients.
To mitigate risk, consider the following:
Before signing a contract
- negotiating terms to strike a balance between service, risk and price e.g. incentives and penalties
- building in dedicated customer support
- ensuring that you are able to access data (or most recent data image)
- clearly defining scopes of work and outcomes in plain English, including what is included in the price and what comes at an additional cost
- consider if business interruption insurance is appropriate and available
- conducting due diligence on the provider, including their capacity to provide the services and IT security certification and data handling
- contacting referees for the service, and making your own independent inquiries beyond those referees
- potentially maintaining existing software as a redundancy until data migration is complete
During the contract term
- manage the contract by monitoring the service, providing regular feedback and maintaining contact with your contract representatives
- staying up to date with competitor products, together with their pricing and market reputation
- ensure that you regularly take a copy of key data to be available if the provider terminates your access
Well before the end of the contract term
- plan for alternative processes and systems of work if the contract is not to be renewed
- whether or not you intend to change provider, test the market and compare alternative offerings
If disputed matters escalate
Getting advice early is the best way to understand options to protect your business’s interests. While tech contracts can be inherently risky, active engagement will support a better contracting relationship and also better position you in the event of any future dispute.