Use the Vendor’s Agreement as Your Contract Template
When it comes to contract negotiations, the focus is, understandably, on the finish line: how do we get this document signed as quickly as possible? It’s in nobody’s interest to belabor the process; everyone involved wants to get down to the business that the contract covers.
One of the most effective ways to expedite the process is to use the vendor’s paper, something that (assuming it’s drafted well) is already tailored to the unique features and intricacies of the vendor’s products and services.
Why does this approach expedite the process? Several reasons:
The terms already conform to the vendor’s business model.
I have worked on any number of transactions in which a large enterprise customer insists on using its standard agreement as the starting point. Sometimes that’s fine. But more often, it’s like fitting a square peg in a round hole. The customer’s form agreement attempts to cover a broad range of transaction types. Invariably, numerous requirements, stipulations, obligations, etc., just don’t apply, forcing both sides to spend hours (i.e., dollars) ironing things out.
For example, rather than imposing numerous, over-reaching data security obligations on a vendor, the vendor’s paper addresses the specific type of data to be collected, accessed, or stored, which then dictates the relevant data security obligations.
The vendor’s paper is more evenhanded.
In most instances, the vendor is motivated to close the transaction as quickly as possible — to avoid unforeseen roadblocks. The well-drafted contract is deliberately developed to cover what’s necessary in an evenhanded way — a way that contemplates what the customer will request, and fairly addresses and protects each party’s interests.
Trust is established from the start.
The streamlined contract leads to swift negotiations. With fewer issues in contention, the parties are more likely to develop a positive and trusting relationship. Ultimately, using the vendor’s balanced paper establishes a basis for a mutually beneficial relationship, rather than starting out by arguing over irrelevant or over-burdensome issues.
With that in mind, if you agree that it’s beneficial to use the vendor’s form contract rather than the customer’s template, how do you make this happen? Some suggestions…
#1. Explain how your business (i.e., that of the vendor) is different.
What aspects make it unique and unlike other offerings that are commonly grouped together in the same category?
Issues to consider include the following: the extent to which the customer controls the configuration of the service; the personnel or third parties that the customer may permit to access and use the service; the nature and type of data collected, accessed or stored; whether or not vendor personnel will access the customer’s systems or perform services on-site; and whether transition assistance may be required at the end of the relationship.
Whatever the specifics, the more unique your offering is in the eyes of the customers, the more likely they are to use your paper. Which leads to the next point…
#2. Highlight these differences early and often during the sales cycle.
Instruct your sales team to continually remind the customer of your unique elements.
For example, if the vendor won’t be accessing or storing personal information, or if the customer solely controls the content used in connection with your system, find a mechanism to make the customer’s procurement and legal aware.
#3. Arrange a “pre-call” with the customer’s legal department or procurement staff before agreeing to use the customer’s form.
Again, this gives you the opportunity to point out why your offering is unique, as discussed in a previous newsletter, here.
#4. Specify in your quote that your pricing is contingent on using your paper.
Believe it or not, I’ve seen this approach succeed. Consider charging a different fee or imposing a surcharge if the customer insists on using its own paper.
Contracts are a necessary precursor to doing business with a technology-enabled vendor; negotiations often serve as a hurdle for moving forward and beginning the real work.
As a vendor, explain the unique nature of your product and service and the benefits of using your paper. As a customer, listen to the vendor and consider its approach.
Ultimately, and regardless of which side of the table you’re on, if you use the vendor’s well-drafted contract, you’re more likely to reach a final agreement effectively and efficiently, while establishing a positive, trusting relationship in the process.