Avoid contract traps

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HOW DO IT MANAGERS avoid being bitten by nasty terms hidden in the many contracts they have to sign? By biting the bullet and learning how to negotiate better deals, say experienced readers.

My recent column on the experience of "Mr. Reading" with an automatic renewal clause in an L-Soft maintenance contract sparked a great deal of discussion from readers about how IT managers can protect themselves. Many pointed out that L-Soft isn't the only software company whose maintenance contract renews automatically if the customer doesn't give 90 days notice. Such terms are apparently called "evergreen" clauses (since their purpose is to keep the green stuff coming in permanently), and experienced IT contract negotiators say they are always on the lookout for them.

"I have reviewed more than my fair share of contracts, and autorenewal is something I always notice and always strike out of the contract," wrote one reader who believes all contracts should be reviewed by a lawyer. "After watching bad business decisions and poor contract review cost our company literally millions of dollars, I am not so sure that most midsize companies shouldn't at least keep outside counsel on retainer ... Since many software agreements include other sneakwrap provisions -- like providing full access to the premises to inspect the servers to make sure customers comply with licensing, aggressive payment terms, and allowing the vendor to use the customer name in presentations and marketing materials, I think it must be the IT professional's duty to review this language carefully. Taking the time to review all contracts and license agreements up front protects the company down the road."

There are ways for IT customers to play hardball with vendors who won't modify their terms. "I once was negotiating a large services contract that the vendor refused to negotiate on the softening of the automatic renewal clause," wrote another reader. "The contract stated that at least 90 days' notice must be given, there was no upper limitation on the notification, and I knew their intent was that the clause would be forgotten about until it was too late ... so at the contract closing, I handed him the cancellation notice that prevented the automatic renewal from taking effect." Along with giving the vendor a cancellation notice, the reader also notified the vendor that all change orders were going to be completed by another vendor, which prompted the vendor to agree to draft a fairer contract. "It actually turned out to be a good relationship between the companies, but it nearly didn't happen because of the hidden agenda of their evergreen clause."