As we have increasingly become a web-based world with many businesses embracing web-based solutions, there has been a shift from traditional ‘on premise’ systems to cloud based solutions. This has paved the way for tech giants such as Amazon (via its Amazon Web Services (AWS)), Apple (via the AppStore) and Google (via Google Cloud) to firmly establish their place in the cloud services market.
Businesses use these cloud offerings to host their software applications and platforms and utilise them to supply their own services, commonly on a subscription basis.
We have also seen a rise in the number of start-ups offering innovative solutions to the giants of the tech world. Having done battle with them in contract negotiations and reconciled SaaS terms with App terms, we have some top tips for engaging with the big guns.
From a customer/business perspective, there are many benefits to using cloud-based solutions: low variable costs; the avoidance of incurring a hefty up front infrastructure expense; reliability, scalability and security.
The giant as a client - landing a client such as Amazon or Google with their brand reputation, connections and very deep pockets could be a dream come true for a savvy supplier…
These tech giants have numerous sets of standard terms and conditions, a suite of standard contracts and an army of contract managers, in-house counsel and external legal support, all of which can be a minefield to navigate unscathed.
Standard terms tend to be heavily biased towards them as the supplier and are notoriously difficult to negotiate, so you need to be ready for a battle. However, it can and has been done…
Pick your battles
Focus on your key issues - there is room for manoeuvre, but be aware that it is limited. Identify what your keys areas of risk/concern are and focus on them. Typically these are: price; payment terms; the right to cancel; liability and service levels and support (SLAs).
Price: be wary of blanket rights to increase prices. Ideally, the price should be fixed, even on renewal. However, if this is not achievable, a fixed price period followed by capped increases could be an acceptable compromise.
Cancellation: ensure that you have the right to cancel, and that that you will have the right to access and extract your data in a practical and useful way upon exit.
SLAs: ensure that you have a meaningful remedy if the service falls below the standard you expect. Consider what your greatest area of risk is and ensure that the supplier is ‘on the hook’.
Limitations: be mindful that any limitations in the service you receive will need reflecting in the terms you have in place with your customers. For example, if the hosting provider will only pay service credits when availability falls below 99.5%, do not offer your end customer service credits when availability falls below 99.9%.
IPR retention: ensuring you retain your intellectual property rights (IPR) in your product must be a high priority. If any IPRs may be developed during your relationship with your new “uber-customer”, then consideration needs to be given to who should own any such IPRs.
It is not uncommon for larger well established organisations to pressure the underdog by imposing tight timescales and rushing negotiations with minimal contact or putting up barriers to open lines of communication such as “it’s standard practice”, “we don’t negotiate our standard terms, we have them in place with all of our suppliers/customers” or “that will require board approval”. It is also worth remaining sceptical of claims that queries or attempts at negotiation are unusual or unnecessary. It is important not to become panicked by such pressure and remain confident and calm during negotiations, particularly if your request is reasonable and justified and no credible explanation or justification is offered for a flat refusal to consider it.
How we can help
At Myerson, we have a team of specialist IT solicitors who have a wealth of experience in negotiating with large tech providers and have gained valuable insights into their modus operandi.
We advise clients on a wide range of IT contracts and can assist with varying levels of contract health checks, from a simple review and report to undertaking business wide audits and making active and extensive contract updates to best protect our clients.
If you would like further information on the support we can offer during contract negotiations, our IT contract health checks and how we can assist your company and business, please call us on 0161 941 4000 or email firstname.lastname@example.org and ask to speak with our specialist IT team.