In contrast to a few years ago, business no longer hesitates to invest in technology. Computers can perform a variety of core business functions faster, more accurately, and at lower cost than a human staff. The result is increased productivity at lower cost.
If that is not sufficient incentive to invest, recall that your competitors are investing, and probably heavily. You need to match them innovation for innovation simply to stay competitive. Given this pressure, it is understandable that business professionals are sometimes tempted to "sign the contract and launch." This approach contains a number of risks.
Unproven Technology
The "latest and greatest" technology always seems to be the most attractive, filled with new bells and whistles to make our lives easier. Unfortunately, brand new products are often laden with bugs and errors; thus the term "bleeding edge" technology. Unproven technology poses at least two business hazards, one of which is quite apparent and one not quite so visible.
The apparent risk is the time and resources that will be wasted if the product does not meet expectations. The less obvious exposure is that you might not be able to recover those losses. If you followed the "sign and launch" approach, you probably simply signed the vendor's form contract, which probably does not contain any performance specifications or warranties. When you complain that "it doesn't work," the vendor can safely reply "It has a few bugs. We'll have an update out shortly."
Your options are limited:
- Abandon the product and find another solution;
- Wait for the upgrade and hope that solves the problem;
- Sue to get your money back (in the meantime, however, you still don't have a working product).
The Wrong Technology
At a seminar you are dazzled by the speed, versatility and ease of use of "Wonder Werkz version 4.5a" and promptly order 15 copies, at $2000 each. Only at installation time do you realize that Wonder Werkz is a PC program and your office runs on Macs.
You could be stuck. The vendor could simply reply "It's not my fault you bought the wrong product. You never told me you needed a Mac product." If you are a good negotiator, or the vendor wants your long term business, you might be able to negotiate an acceptable resolution, but you will still have expended considerable time and resources and have little or nothing to show for it.
The Vendor Contract
Even proven technology that meets your needs can be a risky investment if you do not pay close attention to the contract.
Consider this hypothetical agreement:
- "We will license 15 copies of Wonder Werkz to you for $2000 each."
On the surface, it seems complete. It identifies the parties, the product and the price. But consider what it does not say:
- Is the license perpetual or for a limited term?
- May you make backup copies of the program?
- How many people may use each licensed copy?
- Is there a warranty?
- What if you receive damaged or corrupted disks?
- Will you be charged for patches or maintenance updates?
- Will you receive a discount on future releases?
- Are you protected in case a third party sues you, alleging that your use of the program infringes their rights?
- Will you receive technical support?
- What will it cost?
Let's increase the exposure. Let's say the contract reads:
- "We will customize Wonder Werkz to meet your needs, as set out in your letter. We will complete the work by April 1. Our charge will be $75,000, paid in advance. Additional work needed after April 1 will be charged at $200 per hour."
Unless your letter spelled out all the details of the project, you could have big problems. The contract does not contain any performance specifications; neither does it contain any warranty of the quality of the vendor's work. Note also the requirement that you pay for any "additional work." You could be required to pay to fix the vendor's own mistakes. Far from being a limit on your costs, that $75,000 fee could be just the beginning.
The point behind all these examples is fairly simple. Technology is useful only when it suits your business needs. If you don't have the expertise to make sure of a good fit, hire someone who does. The extra cost up front will save you lost time, lost capital and endless frustration later. Similarly, before you sign the contract, have it reviewed by an attorney who knows his or her way around a technology contract. After all, the world's fasted super computer won't help your company if it can't run your critical software. Once you sign the contract, however, all your attorney can do is help minimize your losses. Hire the expertise you need up front. It's generally cheap insurance.