Manufacturer’s were “early adopters” of Enterprise Resource Planning (ERP) systems, and ERP has been in widespread use by the industry for decades. It has increased productivity and profitability without creating a massive disruption to companies and their workers.
But one of the problems my manufacturing clients often encounter that I see as their ERP contract negotiator and litigator is when vendors either fail to provide the level of support they promised during the sales cycle or they don’t supply sufficient on-going support to keep the ERP system functioning properly. Based on the software implementation disputes where I have represented companies, there are a significant number of concessions that users of manufacturing ERP systems should be asking for at the negotiating table:
Waive the first-year maintenance fee and do not insist on the “sticker price” for ongoing maintenance. In negotiating ERP contracts, this is one of the first things I put on the table. Often the user is paying six or seven figures to license the system. Making them pay a maintenance or support fee prior to the software being used is unreasonable.
Control a vendor’s ability to increase maintenance or support fees. An ERP system is likely to last 10-to-15 years. In negotiating ERP contracts, it is important to cap the software vendor’s ability to increase maintenance fees.
Allow the user to reduce the number of licensees and drop modules. Business cycles mean that there are times when a user has to downside its workforce, and a vendor can make themselves more valuable to a client by providing that sort of flexibility. Users of manufacturing ERP systems should negotiate the ability to reduce user licenses when those user licenses are no longer being used. Simply reducing the user count is not enough. The vendor should also provide a reduction in license and maintenance fees equal to the number of user licenses that has been reduced. Likewise, we always try to negotiate into a contract the ability of a user to drop unneeded modules as the nature of their business changes.
Vendors who see their relationship with a user as a win-win proposition during and after negotiations are much more likely to have a contented customer who may well be able to provide referrals to other businesses. They are also less likely to end up contending with court orders for documents, to submit to depositions, and to be in a courtroom.
By Marcus Harris