Article

Help with vendors, RFPs and contracts

Michele Hope, Senior Site Editor

As you research and evaluate the need for a larger scale storage solution, you'll hit a few well-recognized milestones along the way. Some of these include a common 18- to 24-month initial research/planning phase.

Here's where you'll begin identifying the storage needs of your organization and evaluating the pros and cons of different vendor solutions. You'll probably also prepare a Request for Proposal (RFP), where you seek specific bids from key vendors based on the criteria you've set forth.

Once you finally decide on the best vendor solution, your job is still not over. You now have to negotiate details related to the final sales & support contracts.

There are several missteps and hazards along this route that could cause you and your organization major headaches. To help you better navigate this process, SearchStorage asked a few experienced readers for some advice. One -- whom we'll call "Joe Smith" -- is a 30-year IT veteran and senior technical advisor for a state agency. (Smith asked to remain anonymous from the layers of government red tape that would otherwise be involved in quoting his real name.) He currently participates in various hardware RFP committees and has spent the past quarter-century dealing with IT vendors and advising his coworkers on enterprise storage and IT-related trends and solutions.

Another gentleman, Scott J. Nathan, is a partner in the Litigation Group where he focuses his practice on technology-related and environmental

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matters. He often advises IT clients on the risks involved in negotiating contracts and service level agreements (SLAs). Nathan also answers reader questions on SLAs and contract negotations on our sister site, SearchSystemsManagement.

Here's what each had to say in the areas of:


How to handle sales promises and vendor claims

Here's what our sources had to share in response to the sometimes over-the-top claims made by vendors:

  • Trust but verify. This statement comes from a recent expert answer made by Christopher Poelker, one of SearchStorage's experts on SANs and a Hitachi Data Systems storage architect. "Everyone can make claims but I would use the nuclear arms protocol of Trust But Verify," Poelker said in response to a reader question on how best to evaluate various vendors. Likewise, Smith gave the following advice to vendor claims: "Prove it!" he said. "Make them prove what they say is true on your floor or at an available lab."
  • Ask vendors to work hard for your business. According to Smith, vendors will often perform a number of studies on your behalf to prove ROI/TCO value, and product performance according to your expectations. He recommended using such resources to help you do your research.
  • Stay open. With vendor dealings, Smith suggested the best approach is often an open one. At the outset, let the vendor know you have a certain problem and tell them what you think the solution might be for it. Then, solicit their opinions. Be open to suggestions they may have for other solutions.

Advice on RFPs and RFQs

While Requests for Proposal (RFPs) are not legal contracts, Nathan indicated that the terms in an RFP often will make their way into the final sales contract. So, it's good to specify the performance conditions you expect. If you're in a U.S. government facility, however, the legal stakes are higher. Most government organizations require you to fill out Requests for Quotation (RFQs), which are often governed by local, state or federal statutes. In these cases, it's best to check with a lawyer to ensure you are in compliance, Nathan said.

Here are a few other rules-of-thumb for approaching this process:

  • Be specific. This advice comes up again as you negotiate final contracts. In the RFP/RFQ phase, however, Smith recommended going into the RFP process already knowing the specific problem you want to solve. "If you don't know the problem, you won't get a good solution," he said. Smith also suggested identifying all of the benefits you want the solution to achieve. "Be sure to identify all of those in the [RFP] document," he said, "such as ease of management, a 30% reduction in backup time, a 10-to-1 reduction in numbers of cartridges, etc."
  • Ask for a beta period and specific vendor tests. "Perform testing and analysis of [a vendor's] equipment and support to ensure it does what it says it will do -- before the contract," Nathan said. He recommended including a beta period, with testable performance standards as part of the evaluation process. On some RFPs where you have suspicions about a product's reliability or features, Smith also suggested making it part of the written bid requirements that each vendor ship the product components to you at their expense and allow you to stress-test them ahead of time.
  • Involve competing vendors in evaluating each other's bids. Smith suggested having the competitive parties in an RFP do an analysis of their competitors' bids. This may bring to light areas you could have overlooked.
  • Require successful bidders to provide you with several customer references. Make sure any customer references will be free to candidly share their experiences with you, Nathan urged. Sometimes, previously signed confidentiality agreements with a vendor may prevent this free exchange. "Most customer agreements these days contain some confidentiality agreements," Nathan said. "You must be able to talk to a referral without the risk of breaching the confidentiality agreement."
  • Ask to review a vendor's financial records as part of the evaluation process. According to Nathan, this is a good way to judge the long-term viability and strengths of a specific vendor, since your satisfaction with any future sales or support contracts may depend on these factors. "Financial stability is an issue these days," Nathan said. "More and more customers are demanding the opportunity to review vendors' financials." While many of the largest vendors agree that customers have this right, this has been a very difficult request for a lot of vendors, he said.

Advice on negotiating sales/support contracts

Finally, when it comes time to select the vendor and negotiate the subsequent sales and support contract, our sources suggested the following:

  • Be specific. Nathan noted that vendors are often more interested in putting general language in a contract, as opposed to specifics. "The more specific the language -- performance, support, criteria for breach -- the more able a customer is to measure the extent of the vendor's success. Specifying performance standards makes the resolution of a problem more easy," he said.
  • Don't forget the escape clause. Let's say you're tied up in a 3-year support contract with a vendor whose support has been very dissatisfactory. According to Nathan, this is just the scenario where an escape clause can come in handy. He recommends adding an escape clause on your sales or support contracts that allows you to end the contract with just 30 days' notice, for any reason. "Customers want the ability to get out of a deal without a lot of trouble, while vendors want to tie up a customer for years," he said.
  • With software contracts, consider asking for a software escrow. With the recent burst of the dot com bubble, many customers acquired software solutions with companies who have since gone under. Unfortunately for their customers, such bankruptcies also obliterated the chance for customers to benefit from any future on-going product support, bug fixes or upgrades, according to Nathan. After learning the hard way, many customers now take steps to protect themselves -- in the event the software vendor can't deliver. For this reason, he suggests the following: "Ask for a software escrow, where the source code goes to an escrow agent." This is another touchy topic for software vendors who are hesitant to share their code with anyone.
  • Ask for graduated software licensing fees. According to Smith, the majority of the cost for high-end disk susbsystems (such as the Hitachi Lightning, EMC Symmetrix, IBM Shark, etc.,) comes from software licensing costs. "Those solutions are as much about software as they are about hardware," he said, cautioning that "you can pay two times as much money on software licensing as you can on the hardware." Since many vendors determine the software license cost based on the assumption you'll use the full storage capacity of a system, Smith suggested asking if the vendor has a graduated licensing policy where you only pay for how much capacity you plan to use. He indicated IBM as one example of this type of policy.

Additional Resources:

Review Scott Nathan's expert answers on SLAs or ask him a new question.

Go to the ASP Industry Consortium Web site for contract examples.

Storage Decisions: Learn tough negotiating practices with vendors in a session with Enterprise Storage Group Senior Analyst Tony Prigmore.

Let us know what you think of this story. E-mail Michele Hope.

Related Topics: Storage vendors, VIEW ALL TOPICS

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