Sottile On Negotiating

Article: The Bottom Line

Grad Student's Forward
Q&A Interview With John
Student's Wrap-Up
Article: The Bottom Line
NOTE:  I wrote this article in 1984; it is focused on licensed, mainframe computer software.  The business PC industry was in its infancy.  The concept of blisterpack, software contracts ("By breaking this deal, you agree..") was being developed and argued.  Typical of most new industries, standards were none exisitent... it was yet another "wild west" to be organized.  Interestingly, the free-for-all of early PC software licensing now looks more like the entrerprise-wide, mainframe software.

Getting To Bottom Line: A Contract
John Sottile

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.


Before computer unbundling in l969, there were no software contracts -- just hardware -- because the 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 -- for both the developers 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?


Just what is the nature of a software contract.... merely 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 MARKETING'S 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.  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 dually 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 them?

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 them?

Both serve a very vital function in the checks and balances in a firm's financial 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 content.  But oh my, how few are!


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 contravention 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 secrets; 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 you like it?  By site; by CPU; by attached processor; by multiple processor; by clusters or networked; perpetual or limited term; exclusive or non-exclusive; transferrable or non-transferrable; etc.


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 interpretation, 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 about, you'd 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 friends, what's it goin' to be?  Change the product to reflect the documentation by which most buyers no doubt based their decisions; or, change the documentation to match the product as if the product spontaneously combusted on its 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.


Finally, let's not 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 Software Sales Awards are next to her/his degree.

I think that you get my implication!