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The Almighty Buck

Contracts Contracts Contracts 70

Posted by timothy from the ignore-the-print-and-sign-here dept.
An anonymous reader submits: "There's an article over at CNet about all those software contracts that are out there, and what to watch for before signing the dotted line. Using California's $95 million Oracle problem, they define what the general terms are that get used in software procurement and support contracts. While mostly geared at commercial software, one can use most of this article to target open source tech support contracts."
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Contracts Contracts Contracts More

Contracts Contracts Contracts

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  • Can't sue open source (Score:3, Interesting)

    by cdtoad ( 14065 ) on Tuesday July 16, 2002 @07:08PM (#3898243) Homepage
    I've discovered that most companies that I've "contracted" with won't use the open source suggestions I give them simply cuz they can't SUE someone if things go wrong. I also state in my contract that they can't sue me for anything other than bad programming and for them to prove that! Ha!

    • Re:Can't sue open source (Score:4, Insightful)

      by dattaway ( 3088 ) on Tuesday July 16, 2002 @07:20PM (#3898294) Homepage Journal
      Is it really about suing someone? Those of us who have worked in large companies see large contracted project fiascos all the time. No one gets sued, but its interesting that those responsible for the decisions seem to defend the mistakes.

      Kickbacks? Were they wined and dined? Did they have a girlfriend involved that happened to have close ties to the contractors? I don't know. Marketing and managers have strange relationships and are often disjoint with the rest of the company. I'm sure stories of bad relationships between vendors would make for great movie material.
      • Yes, it really is about suing somebody.

        In many cases, large consulting firms (KPMG, various SAP groups, etc) are brought in at vastly inflated lates to run a project, in part because they can serve as a scapegoat when the project comes in late and overbudget or fails in a spectacular fashion.

        This is a basically an insurance policy for upper management. Rather than firing the entire management team, one or two token IS directors are kicked free with a golden parachute, and the rest of the blame is directed at the outside contractors.

        The board and the shareholders see the huge damages in the lawsuit against the contractors, and this sleight of hand is enough to direct their ire away from the real culprits in upper management.

        • Open Source.
          When failure is not an option.

    • I've had the same problem. It's totally bogus, of course:

      1. You're gonna sue Microsoft. Or IBM. Or CA. Right. Tell me another one.
      2. Go back and read your EULA. Basically, they warrant that the media is Genuine Media. If you happen to put the disk in a reader, and there happens to be some software on it, and if you happen to install it, you're on your own.

      Point this out, and the argument changes to another bogus anti- open source rant.

      • This article was about when there is an actual signed contract between the corporation buying the software and the software vendor. Under those circumstances, it _might_ be possible to negotiate away the "We are not responsible for anything but putting the software on the CD" clause. However, in exchange the purchaser probably gives the vendor considerable control over the environment in which the software is run. No one can guarantee that software will run properly without knowing what computers it will run on, how they are configured, and what other software is installed on them.

        But if you really want to get Linux under a commercial-style contract, I'm sure you could find some vendor to sell you support for so many copies installed at such and such a site, on such and such computers, with a list of other programs approved to work with it - and they'll throw in install disks too... Then if they don't get the software working, you might be able to sue for breach of contract, unless the contract forbids this.

        I suspect you'll actually have an a better chance of persuading a small OSS vendor to write a contract that does provide penalties or allow breach-of-contract suits for nonperforming software. The reasons for this are both good and bad:

        1. Suppose it turns out that the only thing that will make all the programs the customer needs run together is a little code change in the operating system? It's hard to imagine MS changing Windows just for one customer, especially after they've already got your money, but people do write patches for Linux just because they want it, whether or not it ever gets into the official source tree. Satisfied customers don't sue.

        2. It's likely that a big, complicated lawsuit against an OSS support vendor cannot pay off, because the whole company isn't worth the legal expenses. You'd wind up owning the vendor, but owing the lawyers a lot more than the vendor is worth. OTOH, MSFT could pay $10 billion cash without blinking. It would take 10 years of legal wrangling before you got any of it, but there are many people who would be willing to gamble, even on a poorly-founded case. So MSFT will probably insist upon contract clauses severely limiting the damages you could ever recover...
      • I agree completely! I used to work for a Fortune 500 company that refused to use Open Source because there was nobody to sue. We (the people who wanted to use Open Source) kept pointing out that they'd been screwed several times by several proprietary vendors and had never sued any of them, and they kept ignoring us and refusing to allow Open Source. Any excuse to protect the Status Quo, no matter how bogus. We began to suspect the real reason they opposed Open Source is that no Open Source vendor ever bought them lunch.

  • (when I think of the Oracle/Cali deal)...

    "A fool and his money are soon parted."

    • Since it was a government contract, the money belonged to the taxpayers of California... Am I to intrepret your post as a knock on Californians ?

      : ) Good Job !
      (j/k)

      • Re:The fool... (Score:4, Insightful)

        by Tackhead ( 54550 ) on Tuesday July 16, 2002 @08:09PM (#3898505)
        > > [...a fool and his money are soon parted]
        >
        >Since it was a government contract, the money belonged to the taxpayers of California... Am I to intrepret your post as a knock on Californians ?

        I'm not gonna speak for the original poster, but consider what Californyuh's facing.

        $23B deficit, budget at an impasse (to be fixed using Enronesque off-balance-sheet financing tricks that won't show up in higher taxes until after the election), mismanaged power crisis, highly questionable Oracle deal, pay-for-play legislation for pipefitters unions (in exchange for campaign donations, banning PVC pipe because it's cheaper to install than metal, which the pipefitters oppose) and prison guards' unions (similar exchange: give campaign funds, get favorable legislation).

        Dot-com implosion started in 2000. Last time I looked, this was 2002. Anyone here not able to guess that capital gains taxes would drop precipitously, resulting in a drop in state revenues? Yet spending is up, year-over-year, by a rate far over that of inflation. Up 20% this year alone. Oh, right. This is CA, where only budget that matters is the campaign budget.

        Yet Davis still leads in the polls. So yeah, it looks like a taxpayer and his money are easily parted.

        But I'll be charitable and withhold judgement until after the elections.

        • Re:The fool... (Score:3, Interesting)

          by Dynedain ( 141758 )
          ummm....the pvc banning isn't just a union thing

          My house was built with (illegal in our county) internal pvc supply lines about 15 years ago.

          Last August a pipe broke and flooded two rooms, destroyed wallpaper, drywall, etc...

          Copper pipes would not have had a problem.

          And Davis leading the polls....look who his opponent is (Bill Simon). Needless to say if Reirden had won the primaries, Davis would be falling fast.
        • It's not just a california problem, most ALL federal, state, and local governments have the same basic problem. Once a new program is started, it basically never ends. Agencies never have to justify existing spending, only NEW spending (and not even detailed at that.) What needs to happen is for government to look at Each and Every office, person, program, and for agency directors to justify every penny spent and justify the continuation of the program on an annual basis. Make them criminally liable for thier numbers much like congress wants to do for CEO's of companies.

          Government spending could probably be cut 70% if we did this.
    • I don't think it had anything to do with being foolish. It was obvioulsy a political decision. Hey, it's no skin off your nose if it's someone elses money. In business, the people signing contracts usually have a financial stake in their company (stock options.) Getting the best deal affects their own personal financial outlook so they are more likely to be picky.

      This is a basic problem with government in general. If each congressperson was basically charged double the tax rate of the average citizen (for life, not just their term) they MAY be more likely to be fiscally responsible.

  • Things To Watch For... (Score:5, Funny)

    by Tackhead ( 54550 ) on Tuesday July 16, 2002 @07:21PM (#3898298)
    > There's an article over at CNet about all those software contracts that are out there, and what to watch for before signing the dotted line. Using California's $95 million Oracle problem, they define what the general terms are that get used in software procurement and support contracts."

    At least in California, the list of "things to watch for before the contract gets signed" is pretty short:

    1) A $25,000 campaign donation to the Governor's re-election fund.

  • solutions... (Score:3, Funny)

    by skydude_20 ( 307538 ) on Tuesday July 16, 2002 @07:28PM (#3898324) Journal
    do you want the easy money out of contracts and the secret to avoiding bad contracts?
    sign below and I'll tell you.

    x__________________________

  • Verisign has optional service agreement (Score:5, Funny)

    by BoVLB ( 552171 ) on Tuesday July 16, 2002 @07:38PM (#3898367) Journal

    I have to sign up [verisign.com] for a Verisign test server certificate every two weeks. As part of this, I have to agree to a lengthy service agreement displayed in an editable TEXTAREA. Of course, I always delete the contract text before agreeing to it.

    • Re:Verisign has optional service agreement (Score:5, Funny)

      by jeffy124 ( 453342 ) on Tuesday July 16, 2002 @08:00PM (#3898458) Homepage Journal
      oh that's too easy. you have to edit the contract such that they owe you cold cash for clicking "I agree." Oh and dont forget the clause requiring Verizon employees to bow to you when they pass you on the street, greeting you with "Oh great one"
    • Of course, I always delete the contract text before agreeing to it.

      An alternative with possibly interesting legal implications, paste the GPL (or any alternative licence/contract) into the testarea and submit.

      Since there are apparently no server side validation, it could be readily argued that they have accepted your change of terms.

      I wonder what the legal implications of this would be ?

      • paste the GPL (or any alternative licence/contract) into the testarea and submit

        Unfortunately this is a service agreement; I'm not aware of an FSF licence for that. Even if it were software, I couldn't meaningfully agree to distribute the binary only with source code if I don't have the source code.

  • Clause to watch out for (Score:3, Funny)

    by TheSHAD0W ( 258774 ) on Tuesday July 16, 2002 @07:39PM (#3898374) Homepage
    When perusing a software contract, beware any clauses containing language similar to this:

    Client agrees that all clients database are belong to us. You have no chance to appeal.

  • Contract Analysis (Score:5, Informative)

    by Bullseye_blam ( 589856 ) <bullseye_1@[ ]oo.com ['yah' in gap]> on Tuesday July 16, 2002 @07:40PM (#3898382) Journal
    Well, this is interesting.

    I was hired this summer by a large corporation (4,000+ employees and will otherwise go nameless) to do software cost analysis on their mainframe software. They hired me precisely for this reason: to analyze each contract and summarize their software license/maintenance costs for the current year and into the future.

    Thankfully, my company has been in business since the 1960's and are pros when it comes to language in the contracts. I mostly do work with mainframes, and I've found a few keys to look for:

    1. Hardware upgrades - Many companies will charge additional license fees for upgrades to mainframe CPU's (often in MIPS or MSU ratings)
    2. Maintenance - It is important to put some kind of "cap" on maintenance. A typical example: "maintenance shall not exceed the lesser of 15% of current license fee or 10% over the previous year." Also, it must be assumed that fees *WILL* increase the maxiumum allowable charge under the contract.
    3. Usage - In a large corporate setting, companies often must pay for the use of software on multiple sites or for use of partially owned, divested, or acquired entities.

    As you can see, the charges mount quickly. That's why it's essential only to run the software necessary, and nothing more.

    -Bullseye

  • Should have Standardized EULAs (Score:5, Interesting)

    by Anonymous Coward on Tuesday July 16, 2002 @07:48PM (#3898409)

    In several other industries, there are "standard contracts", and I think it is well past time that became the case in the Software Industry. A specific example is the Building/Construction industry. They have "AIA" (I forget what that stands for, but it should be easy to find) standard contracts that they can call on so everyone is on the same page. A very good idea.

    One reason I love Open Source software is that there are only a few licenses that I have to know about, and just by knowing the name of them, for example knowing something falls under the "GPL", or a "BSD" license, I know EXACTLY what to expect. This is of immense value to me as a user of software.

    I think that property should be more heavily emphasized by the Open Source industry.

    Frankly, I don't know why people put up with the EULA uncertainty and why the courts let Software companies take advantage of people in that fashion. They don't for most other products, heck even "media/content" products.

    Erich Boleyn
    erich@uruk.org
  • Businesses will try to screw others out of dollars most effective ways. Given that horizon for most software companies life expectancy is around 1-2 years(IMHO) the faster you collect money in the beginning of life cycle, the more likely you are going to survive later, nevermind those pesky customers. You can tell them damn lies, lies and more lies, but if your bank is empty, you have no business.
    2c.

  • What was that line again? (Score:4, Interesting)

    by drew_kime ( 303965 ) on Tuesday July 16, 2002 @07:49PM (#3898415) Journal
    It's not about the purchase price, it's the total cost of ownership that's important. Right? Right?
    Stephen Davidson, an attorney and chairman of the intellectual property and information technology law department at Minneapolis-based Leonard Street and Deinard, cited one case in which a company temporarily used licensed software on a computer that was more powerful than noted in the contract. That put the customer at risk of triggering an expansion charge of nearly $1 million and a threat that the license agreement would be terminated if the fee was not paid.
    That's the thing you'll never see with OSS. At worst, you'll lost the support contract, but the software will always be yours.

  • What?? (Score:4, Insightful)

    by Anonymous Coward on Tuesday July 16, 2002 @08:07PM (#3898496)
    "We comb through each word of every contract to make sure that the definitions that we think we agree to are the ones that are written into the document. It is worth the extra time and money to avoid getting jewed by the other party." said Stephen Weinberg, CTO of Dimension Securities.

    I realize that the man is probably Jewish, and that he works in an industry that this type of language is the norm, but holy cow, does CNet have to print it?

    It's bad enough that such epithets exist and are used, but does the man have to slander his own race by using the term? It's like black people who have struggled to gain acceptance in society and transcend racial stereotypes calling each other 'nigger'. It's sad.

    Maybe it's just the paternalistic white man in me that's struck by how backwards the use of these terms is. Maybe my sensibilities are too high. In any case, I guess the only thing I can do is avoid using these words altogether.

    • Re:What?? (Score:1, Insightful)

      by Anonymous Coward
      i m not a registered user just someone browsing the net and found this site but...

      whats wrong with an existing word that has entered the dictionary as a term?
      reaganism .. is that bad? it means supply side economics
      thatcherism .. this too? sell the entire public sector
      jew .. greedy miser who wants his pound of flesh .. go read shakespear's merchant of venice

      and to that jew who used the word .. i admire his honesty and realism and teh thin is .. he probably isnt a greedy miser .. just smart
      • Reaganism is not called "Actorism", and
        Thatcherism is not British-womanism. So
        by your analogy the proper verb should
        be shylock, not jew, eh
    • Wait a sec -- I don't see that in the CNET article? Where did you get that?
  • The only point of a software contract tends to be to put the balance of power in the vendor's, not the customers, favor. How often does a vendor include guaranteed reliability, and free from bugs, with free updates? Compare that with EULA agreements that preclude them from taking any responsibility for the problems that their software may have. I'll admit that software is new and does not have completely solid fundementals, but be able to claim that they have no responsibility to their customer also means that they have no respect for them either.
    • (* How often does a vendor include guaranteed reliability, and free from bugs, with free updates? *)

      Promise the impossible?

      I will tell you what, show me one vendor that has done that and kept costs reasonable. If out of a million vendors, not a single one has done such, then it is probably not technically feasible. (I heard the Japanese tried it, but it took too long to get right.)

      (* I'll admit that software is new and does not have completely solid fundementals, but be able to claim that they have no responsibility to their customer also means that they have no respect for them either. *)

      What is this "respect" crap? It is a dog-eat-dog world and always will be. Soviets fought in a political arena (he who kisses up best waits least in lines), and capitalists fight in an economic and political arena.

      Either prove your dream world exists, or stop dreaming.
  • when there are standardized EULA's for proprietary software. Free software is way ahead of the game here. Sooner or later, users will demand something reasonable from the proprietary majority as well. Someday I hope something akin to a software users' bill of rights lets us all sleep better at night.

  • Seems they got 'Perpetual' wrong (Score:3, Insightful)

    by PotatoHead ( 12771 ) <doug.opengeek@org> on Tuesday July 16, 2002 @09:37PM (#3898803) Homepage Journal
    The article states that a perpetual software license means that you can use it for the life of the product provided that you continue to pay the contract fees.

    As I understand things, a perpetual license really means that once the software is licensed in a particular way, you can go on using it as long as you want. You will run out of support for it after your contract term is up, but you can still make use of the software.

    I have run across this type of license often. It is tied to a hardware component, dongle, or (rarely) a particular site. I have fixed many an older machine just for the use of the software licenses attached to it. The contracts clearly stated the word 'perpetual' when defining the license.

    In many cases, a physical device is used in combination with FlexLM to provide the license functionality. If you do fail to pay your fees and want to move the license, many companies will either require you to purchase a new license (at the current version) or pay all back fees to get a new license key for the version that was in use.

    Anyone else think this definition is bogus, or was I misunderstanding what I was seeing?

    This type of experience was one of the primary motivators for me to begin exploring OSS for my computing needs.

    If you can learn to compile and use Open Source software, then you are set for life.

    • I've seen "perpetual" licenses exactly how you describe them. We "own" it, but it is tied to a particular machine. You have to pay "maintainance" if you want updates, support, or to move the license to a new server. If you have let your maintainance lapse, you have to pay back maintainance, plus a penalty, in order to get current. If you let the maintainace lapse for more than 3 years, it is cheaper to buy a new license than it is to pay back maintainace on the old license.

      I have never seen perpetual licenses like the article describes.
    • Good, then they got it wrong then, or that little mistake is a bit of 'spin' to get people to change their notion of just what a perpetual license is.

      Not that I like these sort of license schemes because I don't.

      I do however prefer the perpetual I remember over the one they are pitching in that article.

  • Contracts (Score:2, Insightful)

    by Anonymous Coward
    It's all well and good to bitch at contracts that favour vendors but wait until you've left the cosy world of employment and created a startup. I was a lawyer for years working for startup companies and getting beat up in long negotiations with big players who understood nothing other than the fact they were big. All these "musts" for customers ignore the economic balance that must be worked out in every end user/supplier relationship depending on the cost of the software, the size of the startup, etc. A startup can be destroyed and I'm talking about companies that make millions per year.

    I'd love to see the article written from the other perspective, for instance end users who never end up paying for their software because they refuse to complete acceptance testing though they continue to use the software. There's one you need a lawyer to avoid. The concept of repaying the whole value of the software for maintenance issues is crazy. If need be, you use a service level agreement that sets out reasonable goals and at maximum, proportional rebates on maintenance and support fees paid for the period of time the problem occurs.

    And the concept that maintenance and support should continue on forever has sunk many a poor company, tying up valuable resources when they should be working on the next product.
  • for just having read about the possible licensing issues?

  • I am starting to see this more and more. The process for implementing a business application seems to be:

    • Get sold on a product by a vendor
    • Convince everyone else in-house it will do the job
    • Make your business processes fit the product
    • Put up with a solution that meets 50-70% of your actual Business requirements.

    I have recently seen the model for one organisation where the technical solution is located WELL below the Leadership and other management and workflow processes.They actually implemented a solution to . . . here it comes . . meet their actual needs.

    Why is it so hard to get management to see the benefits of proper process in implementing a proper solution?

  • Source: http://www.waynerad.com/work.html
    (I also remenber seeing it posted once on Slashdot by AC)

    Hello, end-user vermin. Here's some software. It might work. It might not. No gurantees and in fact, we have no responsibility even if it fries your hardware, scrambles your hard drive, blows up your monitor, messes up your credit report, and gets you indicted for tax fraud with the IRS. You however, have no rights at all, peon. You will use the software EXACTLY as we graciously permit you to. Period. Any unauthorized use, regardless of wheather permitted by other laws is (thanks to our lobbying efforts), not just a minor civil violation, but a federal criminal felony. Ha! You agree to waiving all other "fair use" and other rights including constitutional rights and "inalienable" human rights by accepting this EULA. And we might change our minds about what you can do and you agree to that too. We might even decide to scan your hard drive and monitor your network traffic and secretly report that info back to anyone we wish, and without telling you. You, of course, agree to this too. But don't even bother to complain. You should be thrilled we're letting you do anything at all with our product. And if you don't swear blood oath, full compliance with this license, then FUCK YOU and your little dog Toto too and get this software the hell off your computer and destroy the disk. Oh, and if you don't agree, you can't even refund the software, thanks to omnipotent software store policies. Tee-hee! Thnaks for the cash. l00z3rZ! HA Ha ha .......
  • The article has a link to new microsft contracting scheme. http://news.com.com/2100-1001-919097.html Microsoft seems to be quite an arrogant vendor, in the long run could help some of the other guys gain some market share.

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