Proposals (3 of 3) – Warranties, ….

December 7, 2010

Concluding our short dive into developing proposals, we have discussed the merits of having a standard template and review process to not only improve consistency and professionalism, but also reduce and manage risk. We also addressed some common issues like protecting IP and software licensing. Let’s continue the fun.

Warranties and Indemnification

The other major aspects of T&Cs deals with the liabilities associated with the project:

  1. Warranty – basically, if it doesn’t work or stops working. How long are you responsible to fix it? Note that there is difference between providing  a warranty, which should only address the system not performing as specified and service which can include standard maintenance, updates, adaptations, ….
  2. Indemnification – what if there are damages associated with the system’s operation or failure?

Typically, these liabilities are limited in some fashion. For instance, they liabilities will not exceed the total cost of the system (or project). Note, for those who are CSIA members, there are a good list of suggested T&Cs available on their website.

Customer’s T&Cs

Now, I know this has probably never happened to you, but I’ve heard on occasion from Alliance Partners that the customer will ask to use their T&Cs. Or, send their own T&Cs with their acceptance. So what do you do? Well, first of all, you should have a defined process to review for unfair terms.

Note that if you simply accept their T&Cs, you may invalidate your own insurance policy (which was created according to the liabilities of your own T&Cs). So, a good strategy against an unruly customer may be to ask your insurer for a rider to accept the additional liability and then rebid with that additional charge.


Proposals (2 of 3) – Terms and Conditions

November 30, 2010

Last week, we discussed submitting the proposal for your project including your sales teams. Of course, there is much you should include in your terms and conditions.

Intellectual Property

Your T&Cs should also address the intellectual property involved in the project. To begin with, there should be agreement on the ownership of the work. Is this work for hire? Or, is the purchase of solution including the licensing of the software? Ultimately, there can only be one owner. So, if you sell it, you can’t re-use it.

Many developers struggle with, or even overlook, the value of their software. But since there can only be one owner, it is important for your customer to understand that you will need to start from scratch, which will cost additional time and expense. In addition, you will not be able to re-use code from previous projects which will be more reliable and robust.

Eventually, Alliance Partners often develop standard modules for re-use. By branding these modules, it may be easier to charge your customer for its use. But don’t make the mistake of simply giving the value away. For instance, ‘Oh, I’ve don’t that type of project before, so I can reuse the code and do it in half the time, so I’ll charge half the price.’ No, the project value is still the same. Your efficiency should be your reward to keep.

Software Licensing

But, I’m not naïve. I understand that customers often want to ‘own’ the software. There is the brute force logic of we bought it, so we should own it. And, the common rationale that you might go out of business, so they just want to protect themselves. In which case, you need to explain the principal of ownership and licensing.

Don’t get me wrong. It is OK to appease the customer by giving them the source code, you just need to provide it with a license so you retain ownership. But, you should consider (and address) the following issues:

  • What if they copy/modify?
  • Can they transfer/resell?
  • Can they reverse engineer

But what if there is an issue with the proprietary nature of the application? No problem, simply define which aspects of the application are proprietary. Then, section out that work which will be done and the ownership will be transferred to them without possibility for re-use and therefore no licensing is required. However, all other development should be provided under license and re-use retained.

Surviving and Thriving as a SI (2 of 3)

July 13, 2010

Sales Training

Rick recommends sales training materials from Dale Carnegie and Sandler. In the Sandler Training, you focus on identifying on the ‘customer pain’. You learn to probe to see if you can help thereby clarifying the project scope, requirements, stakeholders, ….

Terms and Conditions

Rick has several interesting recommendations with respect to an integrator’s terms and conditions. For instance, their billing terms are:

  • 40% of total system cost due upon Superior Controls receipt of order
  • 30% upon submittal of the detailed I/O List and Functional Specification
  • 20% upon execution of SFAT or shipment, whichever comes first
  • 10% upon completion of SAT execution, but no later than 30 days after shipment
    Payment of invoices is net 30 days. Payment of field engineering services is net due upon receipt of invoice. Interest of 1.5% per month will be charged to all invoices outstanding after 30 days.

They also specify their delivery relative to the acceptance of the Functional Specification. No need to get caught with a time constraint because the customer could not agreed to work that needs to be done. Rick also believes it is important to include a non-solicitation clause. And, they maintain intellectual property rights – but licenses the customer to use and copy (but not resell or redistribute) that IP.

Company Overhead

Rick also had several recommendations for reducing company overhead. For instance, he prefers to keep the organization flat (minimal management) and expect more from employees. But, he does recommend an ‘Estimator’ to oversee all ordering. He also advocates the use of administrative assistants responsible for minimizing time and effort of engineering (i.e. documentation set up). And, he says that they have no receptionist or operator – instead relying on technology.

Performance Monitoring

With reduced management, there is an increased need for good performance monitoring. So, for fixed price projects, it is important to track all engineering hours and material costs – both estimates and actual. It is critical that your engineering staff are completing projects to the specifications and not just filling the available time.