Contracting in IT and software: three lessons to learn from

July 25, 2023
David Miller


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I have worked in the software/IT services space for over 20 years. During that time, I have come to understand the frustrations and problems that can arise from the contracting process.

If I were to summarise the problem, it would be: how do you sell as much as you can, as quickly as possible, without too much risk or setting yourself up to fail?

Whilst there is no perfect balance, there are some common issues which, if you address them, will make contracting easier and less risky.

Don’t let the contract get in the way

  • Make sure your contract is fair. Unless you are lucky enough to be able to say “take it or leave it”, your customers will expect some negotiation of your contracts. Whilst nailing down protection in key areas (like IP and liability) is a given, starting from a fair and reasonable position gets you off on the right foot. 
  • Be prepared for pushbacks. However fair your contract, you are going to get some resistance. It’s natural for customers (and especially their lawyers) to want to make some changes to the draft. You should prepare a response to the most likely queries and requests for changes. Be prepared with (a) explanations of red lines and why you won’t change something and (b) a compromise position on other areas if there is a commercial incentive to make one. 
  • Understand the drafting. It makes most salespeople’s hearts sink to hear the words “the contract is in legal” or “I’ll need to speak to the lawyer about that”. You can’t avoid this altogether, but being able to explain your position can go a long way towards reaching agreement with your customer outside of any legal review.  

Make sure your documents work together  

  • Think about who drafts your documents. Your contracts, SoWs and support policies were probably drafted by different people. If that’s true, they probably came to the job with very different priorities and experience. This will show in the language they used. Ensuring that all customer facing documents are consistent gives a more professional impression, avoids issues arising later and can speed up the negotiating process.
    • To give you one example: I had a client whose contract gave a 90 warranty for their software but this was not reflected in their support and maintenance policy. A customer asked whether this meant that all bugs and errors would be fixed in the 90 day period and wanted to know how this tied into the maintenance they were paying for separately. As the contract had been drafted by a lawyer (not me!) and the S&M policy by the head of support, the client couldn’t answer these questions. This simple query created a long delay in getting the contract signed with my client having to rethink what they were offering and redraft their documents.
  • Take care with your SoWs. Whilst we can spend hours arguing over contractual points, Scopes/ Statements of Work are often drafted more quickly. In my experience, you and your customer are more likely to fall out over the practicalities of a project (detailed – or not! – in the SoW) than the small print of the contact. Whilst using a precedent SoW can be useful here, nothing can replace spending a little extra time ensuring that it is fit for purpose. 

Update and adapt

  • Treat your documents like the rest of your service. As a tech business you will be constantly evolving your services. Your documents need to keep up, so schedule some time to update them whenever you are offering changes and make sure that old versions of the documents are replaced with new ones as soon as they are ready.
  • Learn what works and what doesn’t. If your customers keep requesting the same changes to your contract, consider adapting it to accommodate these changes or to soften your position. After all, if you would concede a point if pressed on it, why not try to avoid the issue before it arises?
  • To give you an example of how I have applied this: I act for a SaaS business who have many large clients in the US. During our negotiations many of them asked for our insurance levels to be included in the contract. Although it added little to the drafting, this reflected no risk to us, so we added them as a standard clause. This meant there was one thing fewer to address with the next customer.

For a free, no obligation chat about how I might be able to help you with your contracting, do get in touch here.

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