I’ve learned that I have to ask a lot of questions in negotiating technology contracts. At first you deal with the sales team. They use words to make a sale. At the same time you may be dealing with the vendor’s engineers and lawyers. The task is to get the engineers to back-up what the sales team said about the product with hard specifications and then to get those promises past the vendor’s lawyers. (Can you tell that I represent the buyer most of the time?)  If I am successful then my clients know what to expect and the vendor knows what to deliver.

Whether it is a purchase of hardware, software or services the task is the same. Everyone has to have the same basic understanding of the deal. What surprises me sometimes is that it is easier to accomplish with multi-million dollar systems than with small purchases. Of course everyone understands the risk of failure due to a misunderstanding is too great in the big purchases. I think the small purchases are just as important and you need to understand what you are getting for your money. That means you have to be sure you and the other party agree on the meaning of the words.

It is beginning to look like the common answer for consumer software and services in our  “throw away” society is that we can’t count on warranties for smaller acquisitions  or on non-disclosure promises from websites. Why? Because the meanings of words such as “lifetime” and “never” may have unusual meanings. You may still be confused after  reading the fine print.

That is a terrible answer, but I think it is a piece in a bigger puzzle. Vendors want to receive constant streams of cash. The shorter the product life cycle, the better the cash flow will be for the vendor. On the other hand, most consumers feel that if they pay for it once the vendor should continue supporting the product indefinitely. The vendor is faced with a dilemma. Funds expended to support prior versions eat into both product development budgets as well as profits. Recent articles in Infoworld by Ed Foster (The Gripe Line) have focused on vendor’s interpretations of when products have reached the end of their support life. His articles are well worth reading to get a better understanding of real world examples of when a vendor feels it is not obligated to continue supporting a product. 

Don’t be too quick to condemn the vendor’s concern with profits. It is important to both parties because a vendor that is out of business isn’t able to provide the necessary support.  And a vendor in bankruptcy may be left with only one valuable asset—its customer data. 

Bankruptcy courts have faced a difficult dilemma. On the one hand the judges try to ensure that as many of the estate’s debts get paid as fairly as possible. In the cases of Egghead.com, Toysmart.com and eToys.com one issue was customer privacy versus sale of a valuable asset that could help generate cash to pay legitimate debts. In each case the company had a privacy policy that essentially promised that the consumer’s private data would never be sold. Egghead’s policy noted that it did not “sell or rent our customer information to any outside party under any circumstances.” The clear wording forced the bankruptcy court to choose between two wrongs. Either the privacy policy was violated or some of the debts would not be paid. 

Last summer the court was presented an offer from Fry’s Electronics to purchase the assets. As originally proposed, the customer list would have been included and it had a clause that allowed Fry’s to terminate the deal if more than 10 percent of Egghead’s customers exercised an option to remove their personal data from the transfer. That is called an “opt-out” policy. The data will be sold unless the consumer opts-out of the deal. The burden is on the consumer to take an additional step.

At first the court borrowed the principals from the prior Toysmart.com case and ruled that the lists could be sold to a buyer that will operate in a similar manner, must agree to the former privacy policy, and that the customers must have some choice regarding the transfer of the information. Further, the court held that future changes in the privacy policy would only apply to data collected after the date of transfer. 

That deal fell through and in early December the court approved another plan. This one allows Amazon.com to purchase Egghead.com and the customer lists. But the deal has a promising twist. The new sale to Amazon essentially takes a different approach. Both companies jointly contacted the former Egghead customers by email. The notice I received included the following statement. 

Essentially, they have chosen a more consumer friendly, “opt-in” policy. In this case the consumer does not have to do anything to maintain the privacy and to retain the benefits of the no sale of personal information promises. However, the result would have been very different if the first sale had been completed.

The lesson is that you really have to be cautious in evaluating promises that involve future actions. Nothing is forever. Whether it is safe-guarding your personal information or providing future support, the value of the guarantee depends upon the continued resources and strength of the guarantor.