What to Do When Your Vendor Is Under New Management

Become familiar with the provisions of your current contract. "Make sure you understand what's being delivered," says Greg Chestnut, partner with Bermuda-based Accenture. Look at service levels, and what the vendor should be delivering to you, he says. What are the delivery points? What are the timetables? What is the pricing structure? At a minimum, you want make sure they deliver what they've already agreed to deliver.Study the financial situation and product roadmaps of current and prospective vendors. "Look for a company with very strong managerial leadership that has a clear vision of where they want to take their product," advises Ben Moreland, vice president of information technology with The Hartford Financial Group, Hartford, Conn. Ask them directly, if they were to be acquired, what kind of company are they looking for?

Choose a vendor that adheres to open standards. "Make sure you choose a company that not only adheres to the standards, but is actively involved in the standards committees," says The Hartford's Moreland. Adoption of standards-based systems reduces the risks of having a product phased out, since it can more easily be replaced.

If possible, get access to source code. Discontinuation of products from an acquired or merged company should trigger the carrier's right to get the source code, says Patrick Hatfield, attorney and partner with Lord, Bissell & Brook LLP, an Atlanta-based law firm specializing in the insurance and financial services industries. The carrier then can employ third parties to assist in support of the system. "To make that happen, the carrier may want to insist on the source code being deposited in an escrow account on Day One," he says.

Add language in software contracts addressing change scenarios. This may include putting source code in an escrow account, or guaranteeing support if a company will not have the resources to maintain source code, says Hatfield. Upfront contract language can also call for advanced notice of product discontinuation in the wake of an ownership change, he says.

Prepare for possible changes in pricing, maintenance, and support. Ask what will happen to your product-even if it is continued by the new owners. For example, says Arun Katash, senior director of products for Ketera Technologies, a Santa Clara, Calif.-based company. "Companies are extremely nervous about how long the PeopleSoft line of products will be maintained by Oracle-and at what point Oracle will inject a platform change, which will change the total cost of ownership picture for the customer."