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5 Fatal IT Vendor Contract Mistakes

5 Fatal IT Vendor Contract Mistakes

  • March 8, 2022

The proper management of vendor contracting is an incredibly essential component of any business as the contract should delineate, in very clear terms, the expected deliverables and services defined by the agreement set forth between the service provider and the client. However, when organizations fail to recognize common pitfalls associated with the IT vendor contract in question, this can lead to devastating consequences which can adversely impact the company, but these are consequences that could have been easily preventable and should never have occurred in the first place.

 

In this post, we will review five common IT vendor contract mistakes and discuss solutions to the problems faced in each unique circumstance.

 

Mistake #1: Buying defective software without a warranty

Defective software is not readily apparent during the initial stages of the vendor contract phase, but the defects will become readily apparent once the software goes live. The vast majority of vendor contracts only allow for a 90-day warranty, which means that the warranty may have already expired by the time the company puts the software into operation.

Solution: Ensure that the warranty is maintained throughout the duration of the contract in order for new releases, upgrades, or even future defects to be covered.

 

Mistake #2: Buying non-compliant software

In this scenario, the software is initially certified, but the certification is not maintained past a certain period of time. This leads to the incursion of penalties, and it prevents an organization from attaining meaningful use incentives.

Solution: Ensure that guarantees and protections are set in place to hold the vendor accountable. Should the vendor decide to no longer maintain the certification of the software resulting in non-compliance, this is immediate grounds for termination, and it may even qualify the organization for a potential refund.

 

Mistake #3: Over-engineering or one off’s

While it may be tempting to redesign the software for the purposes of innovation, or even in response to change, this may prove to be detrimental and is strongly discouraged. Old habits might arise that may influence the redesign and the final result may be worse than intended.

Solution: It is best to allow for some time to pass before contemplating any redesign of the software. Establishing a basic knowledge of the software is the best approach to take in this situation.

 

Mistake #4: Going live with an incomplete system

The IT vendor contract should stipulate that the company is entitled to testing, and this testing is not limited in number. The testing should continue until the software is properly set up and configured. Some companies may feel pressured to go live sooner, but this decision is strongly inadvisable.

Solution:  To ensure a successful outcome, it is highly recommended that the financial obligations and payments be associated with a successful go-live as this will predicate any payments made to the IT vendor.

 

Mistake #5: Holding on to commercially discontinued software

Holding vendors accountable for the unforeseen circumstance of the software being discontinued is essential. While software may become discontinued, businesses must also take into consideration the emergence of second-generation EHRs, so clear terms must be established in the contract for the company to be entitled to the new releases.

Solution: Ensure that the vendor contract stipulates that your company is entitled to the full trade-in value of the original EHR to go towards the next-generation products as you should be entitled to any new releases of the software.

 

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  • JEFFERY DAIGREPONT

    JEFFERY DAIGREPONT

    Senior Vice President

    Contact

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