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Vendor partnerships

Anyone who’s anyone in the IT industry will know that if something has the potential to go wrong, it will, and when it does, it will definitely happen on a Friday afternoon. Consider the large corporate customer who’s e-mail server inexplicably goes offline at 4:55 pm on a Friday arvo. By 4:56, the customer’s IT director will be on the phone to its ISP demanding an explanation. But what if the problem is hardware-based or otherwise out of the ISP’s control? What if the problem is caused by the ISP’s wholesaler or due to a power failure or other external factor? The customer will likely not care. In my experience, customers have little patience for these excuses.

Customers are attracted to turnkey-like total solution providers, where there is one party to point the finger at when things run amok. Vendors can capitalise on this. And to avoid having to provide customers with the disappointing “its not my fault” response, a robust vendor partnership may often be the best solution. Done correctly, the vendor partnership should enable the relevant vendors to work together to solve the customer’s problem.

Many companies do this already. Think strategic vendor partners like Hewlett-Packard and UGS. Or think Sun Microsystems bundling its servers with Oracle software (reported in CRN Issue 188, 23 January 2006). Partnerships are common in the IT industry.

Regardless of the form of partnership, it is absolutely critical to have a strategic vendor partnership agreement in place that clarifies and articulates the respective vendors’ (or resellers’) rights and obligations that are to apply during the term of the agreement. Without this document, it is very difficult to establish just where liability lies when problems occur, and how much assistance each vendor (or reseller) is to provide to the other. Contracts governed by a mere “handshake arrangement” or based on a couple of phone calls, like land mines, are unstable.

Some important clauses that vendors and any reseller, for that matter, should ensure are included in a partnership agreement, are those that deal with dispute resolution procedures, limitations of liability, termination procedures and confidentiality issues. Also of great importance is to make explicit the “key personnel” that are to govern the partnership. There are other critical matters that also need to be addressed.

Vendor partnerships can provide a lucrative revenue stream for vendors. This is unquestionable. However, time after time I have seen parties, frenzied by the potential to make money, wanting to rush into signing a contract before even considering what it is in fact being signed up to. Never sign something that you don’t understand and always consult a lawyer who can protect your interests and warn you if you are entering into a dangerous or risky contract.

Disclaimer: This column is for general informational purposes only. It is not legal advice nor is it a substitute for legal advice. Readers should seek legal advice on their own particular circumstances. Alan Arnott is a technology & telecommunications lawyer with qualifications in computer science and law with Arnotts Lawyers Jones Bay Wharf in Sydney. For more information, please visit http://www.arnotts.net.au.