The Stakes Are High
Technology contracts are not like most commercial agreements. They're long-term, complex, and expensive to exit. A poorly negotiated enterprise software contract can lock your organisation into an unfavourable arrangement for five years or more.
Before you sign, there are five questions every CIO should be able to answer with confidence.
1. What Does Exit Look Like?
Before you enter a contract, you need to understand how you'd get out of it. Ask:
- What are the termination clauses and penalties?
- What happens to your data if you leave?
- Can you export your data in a usable, portable format?
- How long does offboarding typically take?
A vendor who makes exit difficult is a vendor you should be cautious about.
2. How Will Pricing Change Over Time?
Introductory pricing is rarely the pricing you'll be paying in year three. Ask:
- What are the price escalation caps?
- How is pricing structured — per seat, per transaction, or per usage?
- What happens to pricing if your usage grows significantly?
Model out what the contract will cost you at 2x and 5x your current usage. If the numbers become untenable, negotiate before you sign.
3. Who Owns the Data?
This sounds obvious, but data ownership clauses vary significantly between vendors. Ask:
- Who owns the data you put into the system?
- Can the vendor use your data for any purpose — including training AI models?
- Where is your data stored, and is that compliant with Australian data sovereignty requirements?
4. What Are the SLAs and What Happens When They're Breached?
Service level agreements are only valuable if the remedies are meaningful. Ask:
- What are the uptime commitments?
- What is the financial penalty for breaching SLAs?
- Are the penalties proportionate to the cost of downtime to your business?
Credits of a few hundred dollars against a multi-million dollar contract are not meaningful remedies.
5. What Does the Roadmap Look Like?
You're not just buying what the product does today — you're buying into the vendor's future. Ask:
- What is the product roadmap for the next 2–3 years?
- How are roadmap commitments documented and enforced in the contract?
- What happens to the product and your data if the vendor is acquired?
These questions are a starting point, not an exhaustive checklist. For high-stakes technology decisions, vendor advocacy and procurement support can help you ask the right questions and negotiate from a position of strength. Talk to 3RP.