Vendor Quality and Assurance: A Lesson On Vendor Relations

"...Software companies, including Oracle, typically include clauses in their license agreements that remove their liability from any kind of negative business-related events resulting from the software (like crashing all your company's servers), nor are there any warranties for the buyer to fall back on.

In other words, it's "buyer beware" on steroids. "If it doesn't do what you thought, it's not our fault," Jones adds. "[Vendors] are very unlikely to do anything that creates promise in the future."

Two of the main reasons why software companies typically include such licensing provisions are because, first, they can; and second, because there are accounting rules designed to stop vendors from misstating the timing of when they record revenues. For example, if a license agreement includes a 12-month warranty period, explains Jones, the vendor could not book the revenue from the software deal until after the 12 months expired (Wailgum 1)."


I stumbled upon this article soon after a Quality Management lecture in my Project Management class. My instructor gave us a synopsis of a poorly managed IT project courtesy of an article about the problems with the automation of the Census in today's Virginia Pilot. The article discussed the complications of the project, the initial procurement costs of an estimated $5.1 million dollars and a projected additional $2 million plus dollars to make changes to this project despite failing to meet project requirements. The vendor requested more money to fix problems due to the fact that the product it created was not user friendly. In it's defense, the vendor blamed the Census Bureau for failing to clearly specify the specifications of the product it was so expensively paid to complete. Now, from what I have gained from the Project Management course so far and what my now agitated instructor reiterated, is that the vendor was responsible for the efficient management of this project and basically passed the buck. If a project fails, then it is the responsibility of the vendor's Project Manager and the vendor should be held liable.

Ironically, the article for which I'm primarily referencing seems to reflect a similar situation in which Oracle's licensing agreement almost allowed it to escape liability despite any potential negative impacts to its customers. However, this European bank did its due diligence in ensuring via tactiful negotiations, quality assurance in the event of product failure despite an often iron clad licensing clause for Oracle products.

Initially, when I read the headline and the opening excerpt in this blog, I had mixed feelings about Oracle regarding quality and accountability. I guess that is is why it pays to dig a little deeper. Oracle for as long as I have known is a very widely respected company with the exception to some or at least a significant percentage of downsized PeopleSoft employees (I'll save that blog for next time). I am sure that there may be still be some instances where a customer was displeased, but I have not researched those yet.

Anyway, I continued to read further and was quite impressed with how the customer (a European bank negotiator) handled what could have been a stonewalled situation. Hats off to the negotiator in this deal because he really did his homework and mapped out a strategy for what could serve as a best practices approach to managing vendor relationships (Wailgum 3).

The negotiator researched licensing agreements with respect to vendor audits and gained a background on how Oracle and other software vendors typically maneuvered via legal backdoors their way out of quality of service (QoS) guarantees. He did what we often still struggle with in IT and as a society in general, which was to gain insightful information regarding past transactions or events and use it most efficiently. The customer realized an opportunity to minimize costs and risks of doing business by maintaining focus on what was most important (quality and reliability) to them while also providing a benefit to Oracle---for a hefty price of course. Oracle saw it as a win-win situation and despite it's reputation for playing hardball with licensing issues, it decided to bend its rules to accomodate the European bank. Perhaps, it was the weight of the money bags on its back that primarily sealed the deal and not so much that Oracle was becoming soft on its licensing policies.

Although it is very likely the money and obvious mutual benefits sealed the deal, I like to think that Oracle is committed to upholding its reputation as one of the best database (application) vendors out there and cares about its customers.



The referencing article.
href="http://www.cio.com/article/198000/How_a_European_Bank_Got_Oracle_to_Surrender_Key_Software_Licensing_Points"