Top 10 tips when negotiating an agreement for a web site or other business-critical IT

I was recently asked to give my top 10 tips on negotiating an expensive web site based on my experience in drafting and negotiating IT agreements.  Here they are.  I must stress that they apply to the purchaser’s view point.  Different criteria may apply if you are on the supplier side.  Although this is written with obtaining a new web site in mind, these points can easily apply to purchasing other business-critical IT.  Having a good agreement is crucial when spending money on important IT, especially when the vast majority of IT projects are over-budget, to the wrong spec, or late.  So here are my top 10 tips:

1 Spec – Be absolutely clear about what you’re getting.  Have a clear specification for what the web site should have.  Make sure that covers performance issues.  Also, ensure that whatever you want to receive as a minimum is clearly documented.

2 Timing – If timing is important, have a clear timeframe for delivery.  Have incentives for early delivery and penalties (but you can’t call them “penalties” in English law) for late delivery.

3 Fees – Be absolutely clear on price.  What is it costing?  Is it on a time and materials basis, fixed fee or some other blend?  Fixed fee is better to give you certainty and avoid scope creep, although the supplier may charge more to cover contingencies.  Are expenses being charged too?  If so, what do they cover?

4 Acceptance testing – ensure you have the right to conduct user acceptance testing of the web site before it goes live to ensure it all works well.

5 Payment terms – Have a payment plan that is linked to delivery.  Have staged payments based on effort/delivery/acceptance/go-live. 

6 Remedies – Have the right to remedies if things don’t work out – either not delivered properly, not fixed, or not on time.  This may range from requiring the supplier to correct at no cost, through to terminating the contract and getting all money back (as a last resort). 

7 No tie-ins – Make sure that once the web site has been delivered, you are not locked in to the web developer’s other services – such as content maintenance, hosting or their domain name registration services.  YOU should own your domain name.  You should also ensure that you get delivery up of a fully working site (in source code as well as object code).  You should be able to make on-going changes without going back to the web developer and paying them a fee each time. 

8 IP issues – this can be a thorny one.  You would ideally own the intellectual property in the software for the website.  However, in practice, this might not happen, because (a) the web site may consist of a lot of underlying software (eg third party stuff); and (b) the supplier may be able to deliver at a good price on the basis of it being able to reuse other previous material in its library – you owning the IP will not help it to deliver cost-effectively.  At the very least, you’d need an irrevocable, perpetual licence to use everything that you need – including underlying material.  This should extend to a licence to make changes/updates in future.

9 Exclusivity – even if you don’t own the web site, you may want exclusivity so that the developer can’t use/re-write any particular functionality for your competitors for a period of time (eg 6 months) if it gives you a competitive advantage.

10 Be reasonable – a general negotiating tip that applies here would be just to be reasonable.  If you have a lot of web developers who want your business, don’t negotiate them into the ground too much.  You want them to be incentivised to help.