Vendor Consolidation: A Tale of Two Meanings
Performing due diligence to protect against losses that may occur if a technology provider is acquired is of utmost important. Due diligence should be performed both when acquiring technology from a vendor and after a consolidation has taken place. Information such as the service to be performed, service level agreements, number of product releases, indemnification related to breaches, termination clause and so on should be specific and included in the contract. Finally, due diligence should be performed to ensure it is a legally binding contract. Other best practices include:
- As part of the contract, consider having source code put in escrow so that if something goes wrong or if the company is acquired and the technology is “sunsetted,” you will have access to that source code.
- Avoid using Open Source in applications related to intellectual property. A lot of companies that you wouldn’t think are using open source code may in fact be doing just that. If your vendor uses Open Source, make sure it’s supported.
- Bring vendors on site to learn about your business so that you are sure they understand your needs and the service for which you are contracting.
- If your technology vendor is acquired and your Account Rep from the smaller vendor doesn’t reach out to you, reach out to them to make sure that relationship is still there and to learn what will happen in the acquisition.
- If the acquiring company is sunsetting the product, make sure the functionality you need is documented in new product requirements.
- Potential benefits of becoming a customer of the acquiring vendor include ease of doing business if you already have a contract with them, better service and more innovative products.