Enterprise Software

Make sure your packaged-application vendor contract covers these essential elements

Before you purchase a packaged application from a vendor, make sure there is clear language about acceptance criteria, vendor support, and problem escalation in your contract. Learn how to include the appropriate terms to ensure that you're protected.


By Vyom Bhuta

Negotiating vendor contracts is arguably the most challenging task in the packaged application selection process. Often, vendor contracts can be so awash with legalese that they can seem to protect the vendor more than you, the customer.

So what should you include in the contract that would ensure some level of security in your software purchase? The three critical areas you should make sure your contract covers are acceptance criteria, vendor support, and the problem escalation process. If these elements are not already included in the contract, don't sign it until those terms are added.

In this article, we'll discuss these areas and how you can include the appropriate language and terms in your contract to ensure you're fully protected.
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Acceptance criteria
Acceptance criteria usually focus on the usability, performance, compatibility, and security of the software. The objective of defining these terms is to make sure that the software, after implementation, satisfies the needs and wants that you have established.

Below is some potential language that can help you outline acceptance criteria in a vendor contract.

Delivery and Acceptance
[VENDOR] shall deliver the Licensed Software via FTP download and provide Documentation to [CLIENT] upon execution of this Agreement. Each Product shall be deemed accepted as defined in Product Acceptance upon the successful completion of Acceptance Testing conducted in accordance with [CLIENT]'s Acceptance Criteria. (Product Acceptance and Warranty are not the same thing. Warranty follows successful Acceptance Testing.)

Product Acceptance
  1. During the 120 calendar days following [CLIENT]'s installation of the Software, [CLIENT] will be subject to Acceptance Testing as defined in the Acceptance Criteria attachments (Attachment x-x) to determine that the Software is in substantial conformance with [CLIENT]'s requirements as evidenced by these Acceptance Criteria.
    If, during the 120-day test period, [CLIENT] discovers an error in the Software or a substantial nonconformance to [CLIENT]'s requirements, [CLIENT] will notify [VENDOR] in writing, accompanied by documentation ("Error Reports") evidencing such error or nonconformance.
  2. [VENDOR] shall provide [CLIENT], or designee, a written remediation plan within three business days of [CLIENT]'s submission of the respective Error Report.
  3. [VENDOR] shall provide [CLIENT] remedial Software within 10 business days of the Error Report submission, whereupon [CLIENT] will initiate resumption of Acceptance Testing.
  4. If, within 30 calendar days following receipt of [CLIENT]'s written Error Report, [VENDOR] fails to remedy the reported error or nonconformance, [CLIENT] shall be entitled to terminate this Agreement by written notice to [VENDOR] and subsequently return to [VENDOR] all copies and materials relating to the Software delivered to [CLIENT] under this Agreement.
    If [CLIENT], in accordance with Section 1.3 Product Acceptance, terminates this Agreement, [VENDOR] shall refund all license fee amounts paid by [CLIENT].

(Please make sure that you consult a lawyer before using the language suggested above.)

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Vendor support and problem escalation process
Vendor support and the problem escalation process are usually defined by the vendor and should already be outlined in the contract the vendor has presented to you. However, you will need to closely evaluate the vendor's terms to make sure that they meet your expectations. Figure A below outlines the escalation procedures and the response time you should expect from a vendor.
Figure A
Severity
Criteria
Response targets
Resolution targets
Critical

Affects a production environment

Severely affects end customer's business operations (e.g., calls cannot be completed or critical business processes are disabled). Alternatively, severely impacts business operations of service provider due to the accumulated impact on multiple customers.

Continuous or near-continuous interrupton of service

No workaround available

60 minutes (Critical issues must be reported or followed up via phone.)
Vendor will continue to work on the problem until it is resolved or a workaround is provided.
High

Impacts production or lab environment

In lab environment, causes a noncritical impact on development activity (jeopardizing production rollout).

In production environment, causes a noncritical impact on business operations of end customer (e.g., call processing altered in such a way as to degrade service quality or handling of business data). Alternatively, causes a noncritical impact on business operations of a service provider due to the accumulated impact on multiple customers.

Intermittent disruption of service

No stable workaround available

4 hours
Vendor will make reasonable efforts to provide a correction or workaround within 10 business days.
Medium

Impacts production or lab environment

In lab environment, causes a minor impact on development activity (does not jeopardize production rollout).

In production environment, causes a minor impact on business operations of end customer (e.g., minimal degradation of call processing or handling of call data). Alternatively, causes a minor impact on business operations of a service provider due to the accumulated impact on multiple customers.

1 day
Vendor will make reasonable efforts to resolve the problem or provide a workaround if such problem has not been resolved in the next maintenance release of software.
Low

Impacts production or lab environment

In lab environment, causes little or no impact on development activity.

In production environment, causes little or no impact on business operations of end user. Alternatively, causes little or no impact on business operations of a service provider due to the accumulated impact on multiple customers.

1 week
Vendor will make reasonable efforts to resolve the problem or provide a workaround if such problem has not been resolved in the next maintenance release of software.

Vyom Bhuta is the Pittsburgh Branch Partner for Titan Technology Partners and is a contributor to gantthead.

This article was originally published on gantthead on Sept. 26, 2001.

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