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Contracts: The Bottom Line
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My current comments about this article:

Getting To Bottom Line: Contracts

 

Don't know about you, but I've always been fascinated by

implications and intentions. As a kid I got a great kick

from the tag line "facial quality" toilet tissue. What did

someone have in mind? I expose my face to windswept, sub-

zero temperatures while skiing; blistering, 110 degree

temperatures while in the boating; and to daily abrasion

of the epidermal layer while shaving. Is "facial quality"

suppose to mean "delicate" or "soft"? Glory, there must be a

better way to get it said..... Certainly, "hemorrhoidal

quality" leaves no doubt.

 

Having gotten to the bottom of matters, so to speak, I'd

like to refocus attention on another bottom: The Bottom

Line.... getting a signature on a software contract; and the

delicate art of drafting an unambiguous agreement that helps

to do so.

 

Genesis

Before unbundling in l969, there were no software con-

tract -- just hardware -- 'cause software came free. Since

then, however, software has ceased being the step-child of

the hardware industry. Today, its developed and marketed

independently and contracted for separately under its own

legal agreement. And as more software is relied upon by

businesses -- both developers of it and users of it -- the

terms and conditions under which it is licensed/sold becomes

more critical. Typically, there has been a tendency to

delegate the development of this document to lawyers. But,

should-it-be-so?

 

Nature

Just what is the nature of a software contract.... mere-

ly a legal document, or is it much more?

IT'S MUCH MORE. In fact, I contend that a software

contract should be the finest marketing piece any company

has. For indeed, it is the Bottom Line, representing not

only the product, but the company. It may not be "glossy",

but the contract should be the shining example of the style

and fashion by which the company choses to do business.

THAT'S MARKETINGS DOMAIN. Consequently, the tendancy to

solely delegate its development to lawyers should be checked.

The way I see it, when considering contracts, the legal

function is like that of a semi-permeable membrane that

allows the inflow of cash to the corporate coffers, but

prevent its unanticipated (often catastrophic) outflow once

it has been collected (see inset). This simplistic model

isn't to diminish its function.... just put it into

perspective.

You see there is a dichotomy.

Marketers, the workerbees with quota pressures, are dual

focused: Move product and generate revenue. They want to

maximize the offer in knowledge of the truism," the better

the offer, the better chance for success". How can you fault

Lawyers, the watchdogs of the treasury, on the other

hand, are focused on conservation. They have a penchant for

placing limitations in knowledge of the truism, "the less

that is offered, the less that is risked". How can you fault

And yet both serve a very vital function in the checks

and balances in a corporation's finacial survival.

You might be thinking that the no lose position in this

dilemma is the treasurer's office with one side gathering

money and the other guarding its retention. But that's not

the case either. The treasury, and therefore the entire

corporate goal achievment -- not just in revenue but the

various implementations which revenue buys -- can best be

accomplished if the contract is balanced to maximize the

product/company offer against minimized risks. In short

the legal instrument should be powerful enough to attract

revenue worded to prevent disasterous outfows.

E-V-E-R-Y-O-N-E should be concerned about contract con-

tent. But oh my, how few are.

Reality 

In reality, there are two aspects to software contracts:

Legal and Marketing. A little parallelism will help to

illustrate.

 

I think that it is safe to say that when addressing the

legal aspects, a major concern has to be for the body of law

which is still evolving regarding this new technology. Since

it's illegal to have a contract clause that is in contraven-

tion of the law, the real homework is to know the law for

every jurisdiction that your contract's terms and conditions

will be construed by. Copyrights, trademarks, & trade sec-

crets; fitness of use; direct/indirect loss; confidentiality;

states of interpretation; assignment; valid/invalid disclaim-

ers; indemnification; etc. That's the Lawyer's job!

I also think that it is safe to say that when addressing

the marketing aspects, a major concern has to be for the

body of law which hopefully will grow from acceptance of

your new technology. And again, since it's illogical to have

a contract clause that is in contravention of marketing

precepts, the real homework is to know the tactics and

strategies that will distinguish your company and product

from competition wherever it goes. Meaningful warranties;

upgrade provisions; maintenance and updates; education,

support and users' group; billing procedures; escrows for

source; and most important of all.....grant of license.

That's the Marketer's job!

Perchance, you think that I'm all wet on the grant of

license. Not so!

The license is legal, allright; but the granting is pure

marketing: How'd ya like it? By site; by CPU; by attached

processor; by multiple processor; by clusters or networked;

perpetual or limited term; exclusive or non-exclusive; trans-

ferrable or non-transferrable; etc.

 

Intentions

I can't tell which law schools are responsible for which

type of lawyers, but I can tell you that from my experience

in negotiating hundreds of contracts with corporate lawyers

and law firms representing corporations that there definitely

are two schools of thought. The School of Say-Little and the

School of Say-A-Lot. Both manifest their legal cultures

thoughout a corporation.....including marketing.

It seems that Say-Little believes in court interpre-

tation, perhaps believing that reasonable wo/men will avoid

getting there, if the time ever comes. Kind of like, where no

agreement exists -- no agreement can be broken. Say-A-Lot

likes specifics; defines words; and even includes remedies

within the contract as if to believe in the saying that

horrible endings are better than horrors without ending.

Say-Little chides Say-A-Lot stating that you can't

define everything, besides an omission can work against you

if you have taken pains to define most. Say-A-Lot counters

with a the "ounce of prevention....etc." idea, stating that

the heavy one-time investment in drafting make everything

smoother in difficult times.

Why all this? Simply because from a legal standpoint

both sides have their merits. But from a competitive

marketing point of view, the reticence of Say-Little can be

very dangerous, while Say-A-Lot can provide one of the finest

closing documents a company can have, if marketing joins in .

So what is your intention? Let the prospect/customer

know how you intend to conduct business; and what the

implcations of the terms and conditions are. Today, if they

are less than anything to write home and tell momma about,

you'ld better reassess you position.

 

For Example

Here's a sweetheart paragraph that crossed my desk

the other day.

"In the event.......the most current version fails to

perform in accordance with the most current Documentation

(A Documentation Non-Conformity), The Company shall use it best

efforts to correct such Documentation Non-Conformity".

Well Ladies and Gents, what's it goin' to be?   Change

the product to reflect the documentation by which most no

buyers no doubt based their decisions; or, change the docu-

mentation to match the product as if the product spontan-

eously combusted on it own genius?

Based on the adjective before Non-Conformity, one could

get the very sick feeling that what one saw was not quite

what one was about to get.

This isn't filling anyone wants or needs; this is a

legal shell game. And it's true marketing Hemlock.

If your agreements waffle, it's time for review.

 

Summation 

Finally, let's don't get confused. I'm no lawyer and

make no representation that what you have read is anything

but emperical marketing savvy. So check it out with Counsel.

Rather than savvy s/he may shout insanity. But then again,

before you fold your marketing tent, look to see how many ICP

Million Dollar(s) Awards are next to their degree..... Get

my implication.

Sottile's Winning Action Team
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Tactical Marketing Agency

"Marketing Tactics Make Corporate Strategies Happen!"
                                                                   John Sottile