Category Archives: risk

Consortia – the other side

Jason Busch over on SpendMatters was talking recently about consortiums.  He was pretty positive about them – and praised their use as the “easiest way to save money while improving internal customer satisfaction inside a company”.

I’m not as convinced.

A few years ago, I was working for an organization that wanted to join a buying consortium.  The proposed result would be a buying entity that would supposedly garner savings as a result of larger purchases – thus passing along the cheaper per-unit costs to the consortium’s members… sorta’ like a Sam’s Club, Costco or BJ’s Warehouse – just at the large company level.  On its face, this sounds like a great idea.  Pay a small membership fee (someone has to get paid to manage the relationships), get large savings in a number of commodity purchases (paper products, general office supplies, etc).

Oh wait.  Did I say commodities?  Yes, yes I did.  Commodities are an excellent use for consortia buying.  They’re ubiquitous (everyone needs toilet paper and almost everyone’s buying the cheapest they can find), relatively easy to source (and hard to screw up), and bulk quantities clearly reduce overall expense.

But what if your consortia wants to offer something else… say, intellectual property?  Software, for example.  Now I think there’s a problem.  The member companies no longer have identical interests.  Your organization wants Exchange email… mine wants Groupwise.  You want an enterprise license … and I do, too, but my enterprise is 3x bigger than yours.  Consortia buying stumbles in the face of diversity of interests.

Another area where I personally had a lot of issues was the realm of cell phone and long-distance telephone plans.  The consortium wanted a cut of the plan revenue.  I didn’t want them to get money from me this way, as I would prefer to have more cost savings straight from the vendor.  Oh, and the consortium was buying a bulk group of “minutes” that were then allocated to the members.  If I didn’t meet my minimum usage requirements, I had to pony up (which is normal).  But the twist was that if any other member organization didn’t meet their minimum, I was also responsible for helping cover the shortfall.

So, how did I find out about all of these nits in the deal?  Well, me being me, I asked to negotiate the contract(s).  And what I got in return was a lot of static about how the contracts were already complete and that I simply needed to see/sign the Member Enrollment agreement to add us to the consortium.  I said no thanks – that I had specific needs and I wanted to have my own contract (where we could/would selectively incorporate terms from the consortium’s agreement).  Boy did that go over like a lead balloon.

What I learned by reading the consortium’s agreement (which they originally didn’t even want to give me) is that I’m ultimately paying for someone to negotiate a deal that’s good for them, not me.  When I wanted to change the terms with the vendors, they, of course, balked, too (they thought they had done-deals with the consortium and its members).

So the net result is that I’m not a huge fan of consortia buying.  Consortia are essentially negotiation and contracting outsourcers.  I don’t need help getting discounts or better deals… and I definitely don’t need “help” that only really benefits the consortium organization (and not the consortium members).  But I do see value in using a consortium to get the bulk-quantity ubiquitous products of everyday office living.  I suppose, as all else in life, the key is moderation and to read before you sign.

Invoices

Before going on vacation this year, I called my cellphone provider to talk about roaming charges.  I was going somewhere I’d never been (still in the US) and my specific provider has a nationwide plan that excludes those types of fees.  But it is a little off the beaten path, so I wanted to just make sure.

While on vacation, I made 4 calls.  Each lasted less than 2 minutes.  One guess as to what my wife found on our cell phone bill yesterday?

It wasn’t much… about $8.  But it’s not the amount, it’s the principle.  Yeah, I know… people who argue principles are going to lose when confronted by people who argue facts.  And the fact is that the cell contract clearly discusses the fact that while I have a “nationwide” plan, the definition of nationwide is left to a pretty fuzzy, and constantly evolving coverage map on their website (see my immediately prior post on Unintended Consequences).

But even if I lose the argument I’m going to have with them this week, the act of reviewing the invoice is the important lesson to learn.

The simple truth is that even through a mountain of hardware and software, at the end of the day, all of our processes (automated or not) are governed by fallible people.  Since we make mistakes even on routine things, it stands to reason that mistakes are going to appear more frequently in highly-customized situations, such as a unique contract between two businesses.

So, on the off chance that you’re not already reviewing every invoice that comes in against its parent agreement, today is your chance to start.

But “WAIT!”, you say.  Your organization has a process for handling invoices. One that doesn’t include you.  Well, guess what… time to create a new “value added” situation!  Ask to change the process.  Here’s what you’ll need for most places to make this effective and without too much interference in any existing process:

1.  A contract/purchasing numbering system.  You’ll want to find a way to have the vendor tag EVERY invoice they send you with a contract/purchasing number that links the invoice to the genesis of the invoice.  Include a contractual requirement that this number be listed on all invoices and that you can refuse any invoice without this number.

2.  Change the default payment address in your contracts to be YOU.  Oh, come on… you KNOW you like mail.  How many “real” letters do you still get?  😉  This is your chance to get more.  If you use this suggestion, you’ll only be getting invoices related to the contracts you worked on… so at least you won’t get invoices for the toilet paper purchase you had nothing to do with.

If you can’t change the payment address, then teach the recipients of the invoices to look for the contract number that you’ve assigned.  In most organizations where I’ve worked, the contract number is EASILY identified and is drastically different than PO numbers.  So I created a little business-card sized notecard cheat-sheet.  I handed it to the people receiving invoices and said that if they get one with a contract number on it, they need to send it to me after approval.  (This only works if you also teach your business owners to refuse and send-back invoices that don’t have contract/purchasing numbers on them.)

3.  When you get the invoice, compare it against the contract, line-by-line if possible.  If not possible, look for groupings of cost (software, hardware, services, maintenance, training, etc) and compare those.  If still not possible, send the invoice back to the vendor as being incorrect (since your template already includes language that requires this level of itemization, right?).

4.  If the invoice is not correct, send it back to the vendor with a pre-printed form (create one in Word – or ask your A/P people for one, I know they’ve got one).  And when I say pre-printed, I mean, don’t fill it out in Word… make it generic with checkboxes that you actually mark in pen.  Don’t even write the vendor’s name on the form (or have a place for it).  Make it look as automatic as possible with as little human touch as possible.  So the form would simply say: “Dear Vendor:  We are returning this invoice to you to correct the following defects:” and then have checkboxes for “excessive/incorrect amounts, missing contract number, etc”.  It would close with “Please correct these errors and resubmit the invoice for payment.  Note that per our agreement, payment is not due until ___ days after receipt of a correct invoice.”  Fill in the number of days in your agreement (you did include this language in your template contract, right?).

5.  If the invoice is correct, send it to A/P for payment.

Ta-da!  Instant value-add.  Even on a really busy day, you’ll probably only get a few of these.  And if you still don’t have the time to do all of this, create/document this process, create the form return document I just wrote about… and teach your business owners to do this themselves.  You’ll still be adding the value – just distributing the actual work.

Oh yeah… one more thing, lest I forget.  Regardless of whether you or your business owner is doing the comparison and the returning of invoices, make sure you’re recording the difference between the amount invoiced and the amount the contract was for.  In other words, document your cost savings to the company!


Timing is everything in your purchase

So it’s no secret than I’m an Apple fan… and they released the new iPhone 3G yesterday. On dozens of message boards across the world, people are actually complaining that they own a 2G iPhone (the original model) and that Apple won’t upgrade them to the 3G for free.

WHAT?!?

Do we expect this kind of treatment in any other area of our lives? Even in the business world where we TRY to get current price paid to apply to future deals, how many times are we actually successful?

The answer, of course, is not many. Why? Well, because a business that sells you something is hopefully selling it to you for the cost of good sold plus a good (but not gouging) margin. To give you a NEW product without further payment eliminates the margin, thus eliminating profit, thus eventually forcing bankruptcy. Not exactly the successful business model taught in school.

We don’t expect it with our homes or other personal property (try taking your computer back to Best Buy/Dell/Apple/etc for a “free upgrade” and see what they say). But somehow, folks expect it with phones.

Maybe its because we feel like we’re not getting the value out of the technology before it’s been upgraded on us. That in the past, there used to be some significant time period before a new version would be released (just like what we see in the software world). But the truth remains that we have the ability to refrain from purchasing at all. Inasmuch as I love new Apple laptops, I only get a new one every 5 years or so. And I try to schedule my purchase so that I feel like I’ve gotten value (by timing it so that I buy the latest one released, I hopefully ensure that a new one isn’t coming out tomorrow).

But I still feel a pang of regret when the new ones come out. The same is true for cars. When do you buy a new car? When should you buy? Well… if you like the best features, the most advanced tech, the latest and greatest… you buy in August/September, when the new model year comes out. If you like the best price and are willing to sacrifice the lastest-and-greatest, guess what, you buy at the end of the same time… September/October, when the new model year comes out and you get the most recent old one at a significant discount.

Live with your purchase decision, though. Plan it well and then cope with it. But don’t expect your vendors to give you a free upgrade if you’re not paying for it (maintenance fees, anyone?). They won’t be around long to support it if they do.


Do the Unthinkable

In the movie version of negotiation, Party A makes an offer, Party B makes a counter offer (rejecting the first offer). The first set of offers are the extremes, say for example, really low for Party A and really high for Party B. Then, through a series of back and forth discussions, each party slowly moves towards the other in measured, predictable steps. Finally, there’s some huge heroic leap made by one party to accept the other’s “final offer” to successfully conclude the negotiation – both parties smiling as they walk away from the table, arms around each other, glad that they were able to come to terms.

The reality is a little more tricky – and a lot less “clean” in terms of where offers come in relative to what their opponent has proposed. It’s hard work to predict the future, even if you’ve done all of the Information Gathering and Strategic Thinking in the world. And when you have a feeling that you’re really far apart from the start, it can even be worse. So, I’m going to suggest a tactic that you may have considered but never used – one designed to help bridge the initial gap to get both sides thinking about “real” numbers (while I’m a huge fan of negotiating the language of a contract and spend a lot of time doing it, this is really a tactic regarding money).

Let’s set up the problem. First, we have two parties; Buyer and Seller. Buyer wants to potentially purchase a set quantity of licenses. Seller, of course, wants to sell Buyer a much larger quantity of licenses. Thus, there will be two numbers that factor into how much the Buyer pays the Seller: the number of licenses and the cost per license. Buyer believes that they need X quantity of product at Y cost per item. Seller thinks it’s M quantity of product at N cost per item.

To get the negotiation started, Buyer could do one of two things: make an initial offer, or request the Seller to make an initial offer. Most negotiators suggest that you always let the other side go first. In this case, it might be better for the Buyer to go first based on the strategy I’m going to propose. So the Buyer needs to come up with the first offer. Lowballing (or coming up with a ridiculously low offer) isn’t the goal in this strategy. Rather, come up with a “reasonable” offer – one that is based on logic and some consideration to the other party’s beliefs. In our problem, this would mean calculating a dollar value based, perhaps, upon the X quantity but somewhere closer to the N cost. In other words, you already concede a point. (This, by the way, would initial have the appearance of a win-win strategy. In fact, it has the side-effect of testing to see if the other side is going to play that way, too.) So the Buyer’s first offer is $P. (X times N).

$P isn’t a great first offer from the Seller’s perspective. In this particular example, the quantity numbers are where the “real” action is – so the Seller is most likely going to respond with a calculated offer based on the M quantity (regardless of the cost per item). And, in fact, the Seller even thinks that the cost per item is probably too low, too, as it’s based on some discounted amount, not the current retail cost of the item. So from the Seller’s perspective, they have a few choices: 1. They can accept the offer. 2. They can counter with a new calculation by using M times N (their preferred numbers). 3. They can counter some other combination of quantity/cost with numbers between X – M and Y – N.

Or they can try to gain leverage and choose option 4: They can try to highball (take their preferred quantity M times the retail cost). This would create their highest calculable dollar amount and is probably an order of magnitude (add a zero) higher than the M times N number. Remember when I was talking about win-win? If the Seller believes that the Buyer’s first offer was completely unreasonable, there’s a good likelihood that they’re going to respond in kind – and this is the flip-side of that coin. If, however, the Seller believes that the Buyer’s first offer was made in good faith, they’ll mostly likely start with M times N.

So as a negotiator who is properly doing Strategic Thinking, you’re hoping that M times N is the Seller’s highest choice. But what if they come back with M times 10N? How do you respond? You do the unthinkable and LOWER your next offer.

Yeah, you heard me. LOWER it. Your next offer will be X times Y (your preferred numbers from both categories).

But wait! you say. Isn’t that being unethical? uncooperative? unproductive?

No. It’s not any of those things. As I said before, you tried acting in a win-win model. You calculated your price based on part of your preferred position and part of your opponents (based on a reasonable estimation of what that position would be). You presented an offer that, while lower than what the other side would want, was reasonably calculated. But the response you got back was not. Thus, to reset expectations and bust through the unreasonable highball offer, you have to lower your current offer to your best-case position.

The likely result is that the other side will panic. It’s quite rare for a second offer to go DOWN. They’ll accuse you of being uncooperative and unreasonable. They might even say that you’re not operating in good faith (ignore the comment). But a highball offer is a ploy, just as much as your actions are tactics (for a discussion on ploys versus tactics, see The VMO-Blog). You simply need a way to get to the real numbers and doing the unthinkable will help.


More on Letters of Intent

A few months ago, I discussed the reasons why I wasn’t in favor of letters of intent.  They’re simply poorly written contracts – and in most cases, they’re going to not cover the issue that causes a dispute over the relationship.

Consider the case of Alfred West vs IDT.  I trust that you can read the details, but the high-level on this is that West and IDT signed a two-page, handwritten contract (which, much to my amusement, contained the phrase “this is binding”) to the tune of several million dollars.

You know what’s going to happen – and sho’ nuff.  IDT terminated the relationship with West, West sued to enforce the contract.  As of today, the latest verdict gives him $10.5 million.

Folks:  Please do NOT sign letters of intent, term sheets or anything else that is NOT a full-blown agreement.  If you feel the need to do something like one of these documents (or you’re forced to by your business folks), please take these additional steps:

1.  State on the document that it’s NOT binding until a full agreement is later executed by both parties.

2.  Include “time-bomb” language that terminates the agreement in a very short window (so that even if it’s later determined to be a contract by a court of law, it will have expired).

3.  Try one more time to NOT do the letter of intent and push harder for completion of a full contract.  Show your business folks this post and explain the pitfalls of half-baked agreements.

Microsoft trying to convert you from perpetual to SaaS

Well, as I predicted years before I started writing this blog, Microsoft is now trying to convert the average home user from a perpetual software license model to “software as a service” (Saas).

My knee-jerk reaction is that this isn’t going to be good for the average (any) user – business or consumer.  But let’s play it out and see what happens:

In the current, perpetual model, the average cost of Microsoft Office 2007 is $119 (per Amazon.com).  This is a one-time expense and allows you to install Office on two machines (desktop and laptop) so long as you only use it on one machine at any given moment in time.  The average person never buys any kind of support for this product unless it’s a pay-per-incident issue that is SO complex that they can’t get help with it from friends or strangers via the internet.  But you do get all of the updates to the current version of the product (ie: if you’re on version 2004, you’d get all updates to 2004, but not get version 2007).

Because it’s a perpetual license, you can use this product FOR EVER, without ever having to pay another fee to Microsoft unless you want to upgrade to their latest version (which, at the time I’m writing this, happens about every 3 years per platform, alternating between PC and Macintosh).  From a depreciation perspective, if you were going to buy the latest and greatest version of the product every three years, you would divide the purchase price by 3 to find out your annual cost of ownership:  $39.67, which works out to $0.108/day.  Not too bad for the product that supports all of your e-mail, writing, spreadsheet and presentation tasks.

We don’t yet have pricing available for Microsoft’s new online offering, called Albany, but we do know that they’re going to bundle in a few already-available-for-free services.

We also know that Google already offers something quite similar (GoogleDocs) for free.  If you’re already a GoogleDocs user versus a Microsoft Office user, you have made a choice to go with one or the other for a reason (most would say that they choose Microsoft for “guaranteed compatibility” and “support if needed” … and Google users say that they want “openness”, “freedom” and “collaboration ability”).  I highly doubt that Microsoft is going to offer their product/service for free… but I’ve been wrong before.

However, this really isn’t about Microsoft versus Google – it’s about a bigger issue of whether a conversion from Perpetual Licensing to SaaS is really a benefit to either the vendor or the consumer.  Perpetual software users like not having to upgrade every time the vendor releases a “fix.”  They like knowing that they don’t have to keep paying for maintenance when the product hasn’t really changed much over time.  They like having a one-time depreciable expense (if they’re business users).  Oh, and they like knowing that if the vendor ever goes out of business, it doesn’t matter too much, since the software is installed locally.

SaaS offers a level of convenience not found with perpetual products.  You are always on the latest version, always covered by support and you have less of an administrative headache since the product isn’t installed locally.  Sure, you have to have greater bandwidth (I’m guessing Microsoft will actually have you download a full version of the product which will simply “phone home” every time you double-click on the product to use it).  But you give up the ability to sever your ties with the vendor yet continue using the product.

I like the SaaS model for some situations – I use one for my contract management system, for example.  But for everyday, standard use products?  Especially those in millions of homes world-wide?  I’m not sure we’re there yet.  I’m REALLY concerned about the quality of service – and the constant communication connection (from a privacy perspective) of all of these phone-home events.

What do you think?

Presenting the Software License Risk Matrix

As a book, the Software Licensing Handbook can be a little difficult to take into a negotiation. So how about a document that looks like a standard risk matrix (something you’d easily have in front of you while in a face-to-face conversation with your opponent)?

Now available for purchase: the Software License Risk Matrix!

Software License Risk Matrix sample page

For only $15, you can have instant access to the risk issues surrounding most common software licensing terms! Click the Buy Now link in the sidebar.

Firesale

Today is April 1, the day after most corporations close their first quarter. So, I’m guessing that more than a few of you just finished a pretty strong push to get a few deals done by 5pm yesterday. Most folks call them firesales – the financial incentives made by vendors to close out their quarterly pipelines; we talked about them before in the Time Management discussion.

I call it Christmas (well, actually, I call it Hanukkah).

Discounts range from 30-75% off (there’s a rare 80%’er). Add-ins include free products/training/conference tickets, discounted maintenance and even better contract terms. That means that a deal for which you’d normally pay $300,000 can be had for $150,000 or less.

But you can’t just sign random deals as they’re offered. Risk is still a concern, as is purchasing something you don’t really need. I always think about a Dennis Miller comedy sketch when discussing sales. He talks about buying lime-green leisure suits… 2 for the price of 1. And he says that if they really want to screw you, they’ll give you three of them. So it pays to be prepared and know what you want and plan for how to get it.

More important, however, is whether you can get these deals on the off-months. The answer, of course, is yes – so most people just want to know the trick. But there is no trick.

Proper prior planning prevents poor performance!

Yep, that’s all there is to it. If you take your time, perform thorough research, use proper sourcing methods (RFPs, solid team-based negotiation techniques and well-written contracts), and relentlessly manage your vendors, you can successfully obtain solid discounts on ALL of your deals. Because here comes the surprise: a single (or even a few) deals with a great discount won’t overshadow dozens (or hundreds) of deals with poor discounts.

Assume for the moment that you do a modest number of significant deals during the course of a year (say 30 to make it “statistically significant”). Of those 30 deals, let’s also assume that they’re each of modest financial value for a decent sized organization, about $100,000 to $500,000. So, on average, each deal would be worth about $300,000 and your total spend for the year would be $9,000,000 (which adds up about right for such an organization).

Now assume that these 30 deals are equally spread out through the year – and that you’re able to close 4 of them (1 per quarter) with a spectacular discount of 65% off. $300,000 – 65% = $105,000. Four deals * $105,000 = $420,000. Now assume that you only get 10% off all of the other 26 deals ($270,000 * 26 = $7,020,000). Together, your annual spend is $420,000 + $7,020,000, which is: $7,440,000, a 17.4% discount for the year. Not bad.

But assume now that instead of a few spectacular deals, you were able to consistently save 25-30% on every deal. Let’s split it up equally, 15 deals at 25% and 15 at 30%. You know what I’m going to show you, but let me do the math anyways. (15 * $225,000) + (15 * $210,000) = ($3,375,000 + $3,150,000) = $6,525,000, a 27.5% discount for the year.

Thus, consistent “average” savings of 25-30% on each deal will net you almost a million dollars in savings ($909,000) more compared to a few really large savings. Not bad at all. Especially if you live in an organization that measures spend versus savings.

Oh, and I’m not even considering the idea that you can get your 25-30% on every deal in addition to the 4+ quarterly blowouts. Which is why I call it Hanukkah.

So let me repeat the advice:

  • Take your time. Don’t get pressured into something you’re not ready for. Make each step of the negotiation worth something. Rushing to close a deal virtually never is beneficial to you.
  • Perform thorough research. In business school, they teach the “Three C’s” for understanding the basics of marketing research and you can use the 3C’s for your deals, too. Company: learn all that you can about the organization you’re working against. Competition: know your adversaries competitors in the marketplace and the ins and outs of their solutions in comparison. Customers: are you gonna’ be their biggest deal? are you going to offer access to an industry they want inroads to?
  • Use proper sourcing methods (RFPs, solid team-based negotiation techniques and well-written contracts). This is the easiest to say and the hardest to accomplish. It requires significant effort (templates, time, resources), a lot of organization, cooperation and skill. But of the various pieces of the puzzle, this is the easiest piece to “do” as well.
  • Relentlessly manage your vendors. Know who they’re talking to in your organization, what products they’re pushing, deadlines they need to meet, etc.

Y2K+38

Some folks think I’m crazy for continuing to include Y2K-type language in my software licenses.

[Special appearance of the Wayback machine: For those of you who don’t even know what I’m talking about, back in the day, we were concerned that software was going to stop working on January 1, 2000. The fear was that since some sloppy programmers wanted to save computer memory by shortening dates to only two-digits, that once the year moved into 2000, date calculations would no longer work. Thousands of programs had to be tested and patched. Almost every organization did some sort of Y2K audit to figure out whether they were going to have problems.]

Oh, and did I mention that many software vendors were charging for the privilege of getting replacement software that wasn’t coded in this sloppy manner? Yep. Not to mention the fact that the memory problem that precipitated the sloppy coding was solved somewhere around the mid-80s (and even if you want to balk and say that this type of memory problem wasn’t fixed until the early 90s, we’re still talking about having more than 10 years to fix, or prevent, the problem).

So, in typical contractual knee-jerk manner, the legal/contract community’s response was to start including contract language that said that a computer program would work properly after 1/1/2000. At first, this was problematic, as vendors sometimes didn’t really know whether their application would work correctly. Then they were concerned about the interaction between their application and other people’s applications. Ahhh… and let us not forget those lazy vendors who didn’t fix the application properly… they just patched it to still use two-digit years, but make some sort of logical calculation that if the 2 digits were between 0 and 40 (or so), it would be read as 2000 – 2040, and if the 2 digits were between 41 and 99, it would be read as 1941 and 1999.

Craziness, right?

Well, I never stopped including language in my contracts that addresses this problem. Of course, I don’t specify that I’m talking about the Y2K problem specifically – I just have as part of my warranty language that:

“at no additional cost to Licensee and without human intervention, the Software will correctly recognize and correctly process data and formulas relating to the year 2000 and beyond (including arithmetic, comparison, sorting, day-of-week and day-of-year functions), will produce expected results (including correct leap year calculations) and will provide all such date-related data and formulas used by other applications in a format that will permit the correct recognition of dates by the other applications”

Most vendors don’t even blink at this anymore. In fact, I’m not even sure they think about it at all. But for the last ten years or so, I’ve included something similar.

And now it’s time for me to reap the rewards. For I knew a little-known fact (at least in the contract/legal community, that is)… the Y2K problem was a toll-booth on this highway. One of many similar issues. The next one is coming in 2038.

News: Saturday 19 Janurary 2008 is coming soon: this date is exactly 30 years before the bug. Will 30-year bonds and retirement schemes be affected? Let’s wait and see.

The year-2038 bug is similar to the Y2K bug in that it involves a time-wrap problem not handled by programmers. In the case of Y2K, many older machines did not store the century digits of dates, hence the year 2000 and the year 1900 would appear the same.

Of course we now know that the prevalence of computers that would fail because of this error was greatly exaggerated by the media. Computer scientists were generally aware that most machines would continue operating as usual through the century turnover, with the worst result being an incorrect date. This prediction withstood through to the new millennium. Affected systems were tested and corrected in time, although the correction and verification of those systems was monumentally expensive.

There are however several other problems with date handling on machines in the world today. Some are less prevalent than others, but it is true that almost all computers suffer from one critical limitation. Most programs work out their dates from a perpetual second counter – 86400 seconds per day counting from Jan 1 1970. A recent milestone was Sep 9 2001, where this value wrapped from 999’999’999 seconds to 1’000’000’000 seconds. Very few programs anywhere store time as a 9 digit number, and therefore this was not a problem.

Modern computers use a standard 4 byte integer for this second count. This is 31 bits, storing a maximum value of 231. The remaining bit is the sign. This means that when the second count reaches 2147483647, it will wrap to -2147483648.

The precise date of this occurrence is Tue Jan 19 03:14:07 2038. At this time, a machine prone to this bug will show the time Fri Dec 13 20:45:52 1901, hence it is possible that the media will call this The Friday 13th Bug.

-from www.2038bug.com

So… might I suggest that you include Y2K related language now? Sure, some folks might think you’re a little loopy. But isn’t our job to protect folks from the risks they don’t understand?