Protect Your Migration and Upgrade Path
In the world of software, things always change. All too often, Vendors introduce new products with new features, give the new product a new name, and then leave you without an upgrade or migration path that you find desirable. Having spent six, seven, or eight figures on your enterprise software you could find yourself in a weak negotiating position if you did not consider this possibility when you negotiated your original deal.
I’ve yet to see a vendor’s first draft of an agreement that provided a customer with any protection from this ugly scenario. Of course, when the vendor is my client, my agreement is silent on this issue too. After all, I know from experience that few customers have the wherewithal themselves or a real tech lawyer who would ever consider this issue.
When I’m drafting for a vendor, my silence on this issue serves my purpose by not flagging the issue for the general corporate lawyer who I typically see on the other side of the table. It’s certainly not my job to create the issue checklist for a generalist bluffing his or her way through a deal. Thus, this issue often goes to my side due to my mere silence.
However, when I’m drafting for a buyer the answer to the problem I raise is somewhat simple. In the first redline that you send to your vendor, please include a provision similar to this one.
“If Vendor should at any time make a successor product available for the Licensed Program that includes substantially similar functionality and features as a Licensed Program for which Customer has purchased a program license (the “New Software”), Vendor shall provide Customer with: (i) a commercially reasonable migration path from the Licensed Program to the New Software; and (ii) the right to use the New Software under the Agreement at no charge; provided, however, that (a) Customer is current on all fees for maintenance and technical support for the Licensed Program; and (b) this right shall only apply to New Software that is available in production release status on the operating system identified by Customer at the time of the request.”
When I’m representing the vendor, I say “no,” “no,” and “no” again to this idea. My talking points include “substantially similar” is too vague. New software always comes with new features and a new price point, and customers should pay for those new features at the new price point. While we would certainly be open to this discussion when and if there is “New Software” to discuss, this is just one big hypothetical now and should not be on the table for discussion now.
When I’m representing buyer, my talking points include new software is not a hypothetical. It happens all the time. My client is investing substantial money and resources to the implementation of your solution and we do not intend to make this investment without reasonable assurances that we’re not going to be held hostage to an expensive migration path caused by you renaming your next version.
When he says, “We would never do that to you.” I agree with him, but say that I’m not worried about him or his team. I’m worried about who replaces him or buys his company.
Round and round we go. Don’t you just love a good negotiation? This is actually my idea of fun.
Here is some compromise language you might consider if you’re at an impasse.
“Vendor shall only be required to provide the New Software to Customer at no charge if Vendor is currently making available, at no charge, such migration path from the Licensed Program to the New Software to any of Vendor’s other customers. If Vendor does not provide any of Vendor’s other customers a migration path from the Licensed Program to the New Software at no additional charge, then Vendor shall provide Customer with the right to use under the Agreement at no additional charge only the functionality and features contained in the New Software that are substantially similar to the functionality and features contained in the Licensed Program; provided, however that Customer shall not have the right to use, nor shall Customer use, any additional functionality or features in the New Software.”
Just remember, you can’t get something in a negotiation without asking. So, before you say, “My vendor will never agree to this.” Please try. I’ve had success with this concept when I represent the buyer.
As a side note on contract drafting, please notice that my contract language is devoid of pronouns. While this piece is prose, contracts are not. While my contract language is clear and in plain English, that’s not the same as saying that it’s designed to be as readable as this piece read in its entirety.
Pronouns simply have no place in contracts. If you continue to use them (oops a pronoun), eventually some litigator litigating one of your contracts will argue that the antecedent of the pronoun was something nobody intended. At that point, you’ll wish that your contract did not include the word “it.” Folks, that’s the way litigation works.