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The world of computers and information technology has developed some unusual norms in warranties and allocating risk. In other industries, they might seem absurd, but not in IT. As long as you understand the significance of the way IT contracts are done, you can come to a fair deal. As a preliminary matter, let’s clarify that I’m using the term IT in a broad sense. The same principles will apply whether we’re discussing outsourcing your entire IT department, hiring somebody to design an e-commerce site, buying hardware, or just having some software customized for you. Whatever it is, many of the same contracting norms apply. If your new car doesn’t work, you take it to the dealer for repair. Knowing what it’s supposed to do is easy. After all, it’s a car. Everybody knows what a car is supposed to do. It’s rarely that easy with IT-related contracts. Certainly, it could be that the computer doesn’t turn on or that all network communication is down. These would be easy cases. As long as you have anything that looks or smells like a warranty in your agreement, you should be covered. Problems arise because it’s just never that simple. Typical IT problems are more like “The computer is too slow,” “The network is too slow,” “The system crashes too often,” or “The Web site doesn’t have some of the functionality we expected.” These are the types of problems that can lead to ugly disputes. There’s no magic after the problem arises. The solution is careful contracting at the front end. It’s good for both sides of the deal. I say that as a tech lawyer who represents those who sell tech services as well as large businesses that buy these services. Careful contracting is good for everyone in the deal because it ensures that the parties have a true understanding of the other side’s expectations. There is no doubt that taking the time to carefully contract for IT services slows the date of the contract’s signature. Contracting, like any other process worth doing, simply takes time. Still, it can save you if things go less than perfectly. Using the development of a complex e-commerce Web site as an example, the norm in the IT industry is a vaguely worded warranty that says that the Web site will function according to its specifications, or some other vague document or attachment to your contract. The point is that the standard the Web site must meet is this “other document.” It’s the norm because it’s easy and provides at least some guidance. It’s also often a poor way to go because it often doesn’t contain the objective standards against which you’ll later want to judge your Web site. Having said all this, have I ever had contracts where I’ve used some vague specifications as the benchmark for the warranty? Yes, I have. The reason is actually quite simple: It’s time and money. Quite frequently, the parties don’t want to take the time or spend the money necessary to prepare a more meaningful warranty. We all know what a car should do. There’s no similar common-sense benchmark by which to judge IT work. If you don’t specify things in your contract, you may find yourself staring into the face of a bad situation. IT contracting is often a time-consuming and resources-draining project. It takes effort to negotiate a deal and develop things like performance standards and acceptance testing procedures. You can choose to march ahead with a contract that has as much definitive and clear material as a politician’s stump speech. If all goes well, you’ll feel like you made the correct judgment. In fact, you were just lucky. This method is OK for the desperate and those who like to play in the dark. WHO TAKES THE LOSS? When things go wrong in the world of IT, they can have far-reaching consequences. If your office network goes down, you have all the losses that go with the lack of productivity of your employees. If you’re an airline and your reservation system crashes and burns, it’s obvious how disastrous that can be. Who pays for these losses? In IT, the answer is that the customer usually bears these risks. We can argue about how fair it is. The airline could say something like: “Let me get this straight. I pay you $5 million to update our reservation’s software. It stops functioning, I lose millions of dollars and you think that you shouldn’t be responsible for that loss?” The standard IT answer to the question is “That’s right.” The developer’s perspective may not be obvious to many customers, but it does ring of legitimacy in many cases. As the customer, you must build mission-critical systems with enough redundancy and overcapacity to prevent catastrophic mishaps. The argument would be that the airline ran risk in our scenario, when it decided that running a parallel reservations network or providing for more capacity was too expensive. Similar arguments are made when other IT disasters happen. If you lose data, the vendor says that you should have had better backups. I could create other examples, but the point remains the same. It’s up to the purchaser of IT services to create enough redundancy to protect against unacceptable losses. The vendor’s answer to legitimately broken or poorly performing IT products is “response time,” not money. You must largely accept this fundamental norm. Yes, there are exceptions. I have seen and negotiated contracts with real teeth against vendors, but they are the exceptions. So, as a buyer of IT goods and services, focus on what you can get. You should always negotiate for better response time guarantees than are first being offered. Follow this up by requesting specific escalation provisions, which helps to ensure that if level one support can’t get the job done in a reasonable amount of time, it will move up through the vendor’s chain of command quickly. Good response time and escalation provisions can be worth their weight in gold when you’re in a crisis. TECH SUPPORT Over the last five years, the price of off-the-shelf software has clearly gone down. That’s good news. The only bad thing to come out of this development is that software companies have cut back on telephone technical support as a way to save money. I can remember the days of 24-7-365 free telephone tech support on a toll-free number. How things have changed. Now, you’ll often find that tech support is limited to 9 to 5 Pacific time, Monday to Friday. Therefore, it’s available less frequently, and often you’re charged after some short period of free technical support. This is bad news. The good news is that the industry has made major strides in making tech support available on the Net. It’s true that to use these resources well, you have to be a bit more proficient at computing than a person who just uses word processing or chats on AOL. Still, the information online is good, useful, and available whenever you need it. It’s often the same reference material that the telephone tech support people use. You should start using these online resources. It’s often better than an endless hold for an undertrained tech support person who may be looking at the same reference material anyway. Mark Grossman leads the computer and Internet law department of Becker & Poliakoffin Miami. He welcomes your questions and comments. E-mail them to [email protected]. Also, visit his home page at www.mgrossmanlaw.com. Online research for this column is provided by Lexis-Nexis.

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