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Those $*IT Contracts…

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by Chuck Wilson, Executive Director, NSCA

I’ve been writing a lot lately about the risks, traps and pitfalls of contracts our members are seeing lately and I have come to yet another conclusion. I’m starting to believe that much of this ridiculous contract language is coming from the IT departments within the companies. Is the contract language used to “purchase software, equipment and services and to own the intellectual property (IP)” being forced on us because security, AV and other communications systems are networked?

Following my “Risky Business” blog, a member sent me a contract that I couldn’t believe. No business owner would have willingly obligated their company to the provisions in this thing… that is, if they had read it. I’m sure another integrator did just that. It was the most one-sided contract I have ever seen.

Contracting is about the contract. Regardless of whether you call yourself a contractor or an integrator, your company obligates itself via a legal, binding agreement or contract to perform a service or function for monetary exchange. I know what you’re thinking, “We can get out of that; we’ve worked with this customer before with no enforcement. We can justify our exclusions. The consultant must know how the IP transfers,” etc, etc. Yep, I’ve heard all that before.

My point is that we are dealing with a new type of client. This client has far greater expertise than most of us have in software licensing, transfer and ownership rights of IP, ability to recreate and duplicate software for worldwide use, perpetual usage, etc. The IT professionals have huge budgets and complicated contracts with major vendors who have their own attorneys scouring every word of these documents. They seem to be moving downstream to the smaller systems that IT is influencing, yet still contain the same onerous language. Try as hard as you can to offer your customers a contract for them to sign with your terms and conditions, not these.

As another example, I read a contract last week with a $1 million errors and omissions policy required. The sales manager who bid the project thought it fell under the general liability umbrella. He assumed they could simply get that language changed after the project started.

Chuck Wilson

My point is that the contract is not only legal and binding, but it’s how we get paid (or not) on these larger projects. I also received a contract that had a pro rata provision that seemed to read as if the owner could cancel the contract, with or without cause, and the supplier would have to reimburse them for selling them the wrong equipment. What?

Carefully review what you are about to commit to in a contract. Another member suggested, when in doubt, to send the contract to your insurance underwriter to get their impression of the obligations. I like that advice, too.

As a rule, never ever sign a contract that is not 100% clear that you have the rights from the manufacturer and original software developer to buy and resell the software. Most of the time you don’t. I don’t know of a single manufacturer that would ever allow you to provide your customer source code, unlimited copies, perpetual usage, etc.

Risk management in systems integration and contracting has become a “business” issue and one we need to better understand. We thought only construction contracts were bad, but some of these that are originating from the IT world seem even worse.

Chuck Wilson is the executive director of the National Systems Contractors Association (NSCA)_, a not-for-profit association representing the commercial electronic systems industry. At the helm of NSCA, much of Wilson’s time is spent assisting contractors with the challenges of today’s business environment.

He often gives lectures and presentations at key industry events, and has been published in numerous leading trade journals. Reach him at cwilson (at) nsca.org_