Read the Fine Print
How to Negotiate IT Contracts That Work for You
Higher EdTech, Winter 2005
by Vicki Powers
Gone are the days of simply signing contracts as quickly as they cross your desk. Today, higher-education IT departments get involved with contracts early in the process, carefully negotiating each word—whether the deal is for phone and Internet services, maintenance, hardware and software purchases, or consulting.
"I always say the contract is merely a starting point that should be used to balance the needs of both parties," says Traci Logan, vice president of information technology and vice provost of academic affairs at Bentley College in Waltham, Mass. "Too often, folks are afraid to negotiate because it's uncomfortable and can cause delays. I believe [negotiation] is a critical step."
CIOs point to a number of trends relating to IT contracts in education. First, they seek flexible contracts. The business cycle for most higher-education institutions follows a pattern of fall and spring semesters with an extended winter break.
Activity in the summer is typically of a different nature than during the school year, notes Logan, with fewer demands on the IT infrastructure. Internet bandwidth consumption, for example, is seven times higher during the academic year than it is during the summer. Contracts that address such needs receive more support.
The cost of IT services is another trend worth noting. Mitch Davis, CIO of Bowdoin College in Brunswick, Maine, finds that the contracts IT is presently negotiating seek more services for less money. His recent Internet bandwidth contract provides 125 megabytes over two separate path 1-gigabyte connections for $1,000 less than the previous contract for 30MB over a 1GB connection.
More vendors also are willing to negotiate the price of the original product purchase, but many are much less willing to negotiate ongoing maintenance and product support. The margin of profit or revenue for these companies has shifted from software and hardware to support and maintenance, says Joanne Kossuth, CIO of Franklin W. Olin College of Engineering in Needham, Mass.
"What's challenging with this is that institutions are having a lot of fixed costs from year to year and [are unable] to get out of those fixed costs as other vendors enter the marketplace," she says.
Here is some advice to help you negotiate effective IT contracts:
Create a review process that includes your legal and/or finance departments.
The legal and finance groups at Bowdoin College work as a team to build a financially sound solution that works for the whole college. "There is a lot more time spent rewriting contracts to fit the needs of the institution than ... in the past," Davis says. Until recently, he adds, IT was pretty much the only department to review contracts.
Marquette University in Milwaukee, Wis., also works with its legal team on each of its contracts. "We make sure from an IT perspective that we know what's in the contract," says Kathy Lang, Marquette's CIO.
Train appropriate negotiators on the campus.
Contract negotiation is not something that comes easily to most people. "You need to understand who is reviewing and negotiating contracts, and make sure they've been properly trained to understand the nuances of contractual obligations," says Bentley's Logan.
Bowdoin College, for example, provides contract review training for its managers. The training teaches administrators how to manage contracts and how to understand the requirements of contracts, emphasizing the need to take the whole college into consideration when agreements are signed.
Focus on short-term contracts.
Fast-changing technologies mean that shorter-term contracts will provide the agility and ability to keep up with the latest trends, says Olin's Kossuth. The contract may not be ideal financially, she says, but points out that she hasn't seen a huge incentive to go with a longer-term agreement.
Marquette's Lang finds that most service-support contract terms typically run for one year, but could last up to five years. Telecom/Internet services typically range from three to five years, though Lang prefers not to go more than three years.
THE POWER OF RELATIONSHIPS
Contract negotiation is all about developing relationships, according to CIO Joanne Kossuth at Franklin W. Olin College of Engineering in Needham, Mass. Negotiations should be a two-way street, with both parties gaining some benefit.
At Olin, students are encouraged to be involved "in the business of the people that we do business with and partner with," Kossuth says. "This works better to support the college as a whole in terms of the services or equipment that we're purchasing."
Contracts also serve as tools to form collaborations throughout the campus. Mitch Davis, CIO of Bowdoin College in Brunswick, Maine, tries to draw in everyone who stands to benefit from the contract, giving them an investment in the solution.
"If it's an IT solution, you want to make sure the whole campus is invested if you're making a change to the whole campus," Davis explains. "I push contracts down to the people who will be most affected by them."
As a result, Davis works with managers or directors to review contracts that concern their departments, and asks them to make proposals as to what would most benefit their groups. This expands IT into areas where it hasn't been before.
Other groups provide feedback into the process, and everyone benefits from this process or works together to resolve any problems.
"If you share the success, you have to share the blame," Davis says. "You just build better solutions in the end."