Tuesday, January 27, 2009

Software vendor audacity: imposing "gag rules" on clients

Ray Wang blows the whistle on a new practice by some, unnamed, software vendors: onerous conditions in software license agreements that limit the client's ability get outside help. Ray gives two specific examples that he's heard about over the past several months:
  • Contracts that limit the client's ability to use outside consultants to help negotiate contacts.
  • Contracts that restrict the client from disclosing details about bugs, defects, and contractual breaches to the press, peers, and user groups.
This is the sort of thing that raises my blood pressure. Is there any other type of commercial transaction where the seller would attempt to put these types of restrictions on a buyer? If there is, I would really like to know.

But stepping back for a minute, it reveals some things about these unnamed vendors. On the first point, they must be in a very weak position these days if they feel they need to take outside advisors out of the game. On the second point, the state of their software quality and ability to deliver on promises must be pretty poor if they feel they need to gag their clients.

My advise to buyers is this. Read the draft contract. Any vendor that includes such terms and conditions should be viewed with suspicion. Software vendors are always talking about how they want to be viewed as partners. Well, this is no way to start a partnership.

If you still want to move forward with such a vendor, just say no to these terms. Walk away from the table until these conditions are removed. In this economy, I don't think it will take long.

Obligatory disclaimer: I'm not a lawyer, and this post is not legal advice.

Update, Feb. 2: My "cousin Vinnie" gives additional recommendations. I especially like his last point: turn the tables on the vendor and require them to get all of their advisors to sign your NDA.

Related posts
Negotiating enterprise software deals in Q4
Reading the fine print on ERP contracts
SaaS: plan to get out before you get in

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