Category Archives: Uncategorized

Value of a Contracts Person

I’ve been asked, at every job I’ve been on, to justify my existence.  Some places just want to know what I do.  Others really care about the dollar value of the role to the company.  E-mail did it once.  Another was a full-blown business case.  But the end result is always the same – somehow, in some way, I have to convince someone who doesn’t know what I do that I matter.  So I figured that perhaps some of the lessons I learned could work for you, too.

Format:  Find what your organization wants, but typically, I suggest finding your organization’s business case document and using it.  Like being overdressed is better than being underdressed, so it is with the format.

Length:  If you don’t have a business case template to follow, you should be able to justify yourself in under 2 pages.

Purpose:  Don’t be super blunt.  Explain the reason you’re there:  you bridge a gap between lawyers and technologists/executives.  You have specialized skills.  You have experience and training.  You have the ability to protect the company.  You have the capacity to complete deals more efficiently.

Cost:  You won’t normally have access to other people’s salaries.  But you can make mild assumptions about counsel and executive salaries compared to yours.  More specifically, you show that the time that a specialist such as yourself requires to close a deal is much less than those who are not specialists.. and as a result, you can get more done for your annual salary.  This then allows counsel to work on more “important” things and prevents non-trained individuals from attempting to do the job (you have to come up with a smooth way of saying this within your company so as not to offend anyone).

Cost Savings/Avoidance:  If you’ve been in the game long enough, you’ll have an idea of how much you can save your firm on an annual basis.  But remember, this usually only works if you have access to all of the deals (not just those people want to hand you).  So be careful about promising a given level of savings, but sometimes, you’ll need to do so.

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Creating the Batphone

One of the most common stumbling blocks most contracts people encounter is simply getting their business folks to come to them for help.  In a great article from the Wisconsin Technology Network, Mark Foley lists 10 questions a business person should ask themselves to find out whether they should go get contracts assistance in a technology acquisition.  Mark’s triage review happens a little late in the process and the comment from Erik Phelps drives that point home – earlier involvement can lead to better deals.

So how do you get your business owner(s) to call you?  How do you create the red Batphone from their desks to yours to alert you to every new deal that’s coming down the pipe?

Well, Batman responded to the Batphone (and Commissioner Gordon called) using the same rules you should:

1.  Speed.  You’ve got to be quick.  Batman picked up that phone within seconds.  Turnaround time for initial contact should be less than 8 business hours.  Seriously – you can call someone back (yes, CALL them, not e-mail) in less than a day.

2.  Triage.  Deals should be ranked for importance and severity.  Learn to let the little things go.  Commissioner Gordon didn’t call Batman for every petty thing his police could handle and you shouldn’t be doing every purchase order.  There is a hierarchy of purchasing tasks – and dollars and company impact are key to understanding that risk.

3.  Trust.  Your business folks have to trust you.  Which means that you have to be honest with them.  If they think you’re slowing things down just to get a word or two into the contract, that’s going to tick them off.  In one of the Batman movies (the one with Val Kilmer and Nicole Kidman), the phone was replaced with the Batsignal – the giant light.  In one scene, Nicole had the hots for Batman and used it to lure him to the rooftop to seduce him.  Batman reminded Nicole that it wasn’t a dating signal.

4.  Value.  This one’s not as easy, but you have to get a few wins in early.  Which means that if you’re just starting out, you need to prove that you know what you’re doing.  If Batman didn’t actually save a life or two, the trust and value component of his vigilantism would drop.  Even if the police wanted to use him, they couldn’t because he’d just look like a raving lunatic in a cape.  While contracts people don’t have capes (well, I don’t… do you?) – we have the tendency to be seen as lunatics.  We push for intangibles that very few people understand thoroughly.  So we have to eventually (hopefully quickly) show value.

5.  Process.  You have to teach your business owners the process you want them to follow.  Don’t assume they know your name or e-mail address… or where you sit.  SHOW THEM.  Develop a process flow to teach them when to call, what you’re doing and how everything fits together.

Oh, one last thing:

6.  Give them the Batphone.  Batman, both on TV and in the movies, gave the city the way to get in touch.  HE covered the costs, so to speak, of making contact simple.  Today, that means asking your telecom folks to help you get a dedicated “contracts line”  – an easier to remember phone number.  If your department has an acronym, see if it’s 3 or 4 letters and find out if the number equivalent is available.  Or ask for a repeating digit (like x1111).  If you have an internal phone extension system, there are a lot of opportunities.

Get a dedicated e-mail address (two or three, actually).  contracts@____.com ; vendors@____.com ; etc.  They can be aliases to e-mail lists to make sure that everyone on your team gets the message if someone calls – even if it’s just you.  Give out contracts@ to your internal folks.  Give out vendors@ for generic things from your vendors (like for insurance certificates and on your templates for a notice address).

Do you have anything else you do to get your business folks to come to you for help?  Let us know in the comments or start a forum topic.


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.

Airline Service… and contracts

When you buy a ticket to fly, you actually are saddled with an adhesion contract for carriage.  You know it as your ticket.  It’s an adhesion contract because you can’t fly without accepting the terms – and the terms are non-negotiable.  And while you may have seen the brief version of them on the back of your ticket, I doubt you’ve read the full version, so here they are for a few of the most popular US airlines:

American Airlines, Delta Airlines, Northwest Airlines, Southwest Airlines, United Airlines, US Airlines

In my local newspaper, they had a story today about how airlines are becoming more stingy at passing out hotel vouchers in the event of an unexpected overnight stay.  The article basically indicates that the airlines are blaming the reduction in “service” on cost-cutting measures.  Now, let’s forget for a moment that US-based airlines are exactly where they asked to be (deregulated) and for the most part, are struggling hard to survive.  They have a stranglehold on air travel within the US (and many have a significant overseas presence as well).  And in their time of crisis, while many more consumers decrease their flights and fuel prices skyrocket, the majority of airlines choose to reduce or eliminate service.  Which is interesting, seeing that they’re a service-industry.

But while I could debate the service issue forever, I find myself focused on the contract… my one salvation in the event of a serious problem with my trip.  I’m not a million-miler, but I do fly several times a year.  The increase in fuel costs actually pushes me towards flying, as I can get wherever I’m going more cheaply.  But with the decrease in service, fewer airlines offer routes to where I go.  As a Disney fan, my #1 destination of choice is Orlando.

That means that I really have two ways to get there expediently.  Delta and Southwest.  If I choose Delta, I know that my return trip is ALWAYS going to be delayed (in the dozen or so times that I’ve done the trip, it’s always happened).  But on only one of those trips was there an overnight-level delay… and of course, Delta blamed it on weather so as to avoid liability.  So while I’ve gone through dozens of delays (hundreds, if you look across the entire span of my life)…  I can think of only two times where I’ve been compensated – and it wasn’t by Delta.

If this was any other industry… any other situation… I would’ve expected at least something in exchange for my inconvenience.  Because I hold the ticket/contract relationship sacred.  I pay, they fly.  And as I’ve said in other places, I don’t think that the airlines would think it ok if I delayed payment (they would simply delay giving me the ticket).  So this mutual respect doesn’t seem to flow in both directions.

Southwest is eventually going to win this competition simply by delivering quality service … without cutbacks.  Oh, and don’t even get me started on the “oversold flight” issue.


99.999

Back in the day, we used to fight for five-nine availability.  This meant that you would have access to the product or service 99.999% of the time.  (If you’ve not read Wikipedia’s article on the Myth of the Nines, now’s your chance.)  Mathematically, this equates to only having 5.26 minutes of downtime a year.  Pretty impressive, when you consider how long it takes the average computer to simply reboot.

We would tie the availability requirement to a penalty (aka “financial incentive”).  This is a kissing cousin to service and support response/repair times and similar penalties… and it heavily applies to situations where you need steady and consistent access to a particular product.

For ASP/SaaS products, uptime is extremely important, as it not only defines the amount of time you have access to use the product but also is a measure of the service provider’s value/responsibility (you don’t have access to the product to fix it yourself).  Until recently, though, network bandwidth wasn’t really available to sustain the offerings and was the scapegoat for much of the argument to reduce or eliminate uptime requirements, even if it was the vendor’s back-end server performance causing the problem(s).

As a result, compromises were made to allow uptime calculations only based on daytime work hours (so downtime at night wouldn’t be counted) for those businesses which didn’t have 24/7 operations.  Compromises were also made to allow vendors the ability to challenge a request for credits based on downtime.  Of course, compromises are fine so long as you’re not compromising your business model.

Flash-forward almost a decade.  Gigoam commented recently about the fact that the current movement towards more cloud-based computing is going to require more attention towards availability.  I agree.  And I’m a little disappointed that I haven’t yet seen a likewise return of significant uptime commitments.

The bandwidth is here (to understand the difference between then and now, check out this table and compare 10Base-T versus Gigabit Ethernet, almost a 1000x speed difference) and applications are designed to be a little more efficient, too.  The result is a resurgence of ASP/SaaS products.  There are several that I love, actually.  They’re incredibly good products, with good support and they don’t typically have downtime problems.  But I’m not seeing uptime guarantees of any significant amount.

To get decent uptime availability commitments from your providers, you need to be in-the-know regarding your own proposed usage and the product offering:  Know what the service’s value is to your organization.  Know when it must be available and when it can be down.  Know about server-loads and peak-usage periods.  Know the difference between hot/warm/cold backups and have an understanding of what failover might require.

99.999% availability might never be offered again… but something should be.  Make sure you’re asking for an uptime guaranty from your providers. Never forget that the middle name of ASP and the last name of SaaS is service.


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?