What is included in the fees paid?
It is critical to specify what is included such as hardware, software (including third party software), custom modifications, updates, enhancements, new releases, documentation, delivery, installation, training, support, maintenance, technical assistance, disaster recovery, warranty, taxes, travel and other expenses. When listing deliverables it is important to be precise in what you are getting for the fee paid. For example, if you are paying for support that includes “upgrades” or “enhancements,” how are they distinguished from new products that are sold for additional license fees is an important component in evaluating pricing. Vendors will expect to be paid an amount that at a minimum can cover their personnel costs, especially if extensive services are necessary to implement the project. Starving a vendor of cash will not guarantee quality performance. People need to and expect to get paid. The purchaser or licensee will most likely seek some form of acceptance testing that can be linked to a payment schedule. They may, however, find resistance from a vendor that is a public company and is required to follow accounting rules concerning revenue recognition. While being sensitive to revenue recognition rules and the vendor desire for early payments, it is still appropriate for any business buying technology to use payment as a motivation for performance and completion of the system. By withholding a portion of the fees until final completion or linking payments to the achievement of critical milestones, the purchaser can provide a strong incentive for the vendor to complete the performance in a timely fashion and in accordance with the customer’s requirements.
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