3 things you MUST consider before signing cloud-based software contracts

March 8, 2017

Not taking these things into consideration could be a huge mistake.

I recently received a call from a dental group who asked for help transitioning their data from their current web-based vendor to a new vendor. When I asked them if I could look at their present vendor’s data-transition warranty to see what the contractual commitment was regarding this, it was apparently non-existent.

Dental groups and DSOs make software decisions every day based on how the screens look and function-but few use the actual terms and conditions of the potential vendor contracts as they work through software vendor evaluations and comparisons.

And having been involved in the selection and purchase of numerous cloud-based software systems for groups over the past decade, the best advice I can give is a reminder that the contract you sign is critical in the success or failure of your cloud-based vendor selection decision.

There are many advantages in having the software hosted by the vendor. You don’t have to deal with a lot of the IT hassles that inevitably come up with your application. You pay the vendor on a subscription basis instead of incurring large upfront costs. You also don’t have to deal with taking care of system-maintenance issues, or making sure that the system is optimized for efficiency. Fact is, you would probably rather take care of patients than deal with these vendor software issues

There are many items to review and structure in a potential cloud-based contract to help you make your vendor selection. Here are some of the most important:

Will your vendor assist in transition to a different system?

You don’t want your cloud-based vendor to have the ability to hold you hostage to their system regarding your data. I’ve had numerous groups who didn’t know what they were getting into complaining that they were switching to a different vendor and their present cloud-based vendor either wouldn’t cooperate in the transition or decided to charge them an exorbitant amount to assist. These issues are also magnified when the vendor’s database is of a proprietary nature. There is language that will guarantee a smooth transition. Also, if you’re switching to another system, there should be a period designated in which you should be allowed access to your present system to do work until the new system is fully up and running.

Do you have solid uptime and performance guarantees?

You have to remember that when the vendor is hosting your system, they have more control over the operations of the software. They are in control of whether the system is up or down. And they are in control of how they respond to issues that you might have.

Unfortunately, when the group signs contracts they often don’t think to make the vendor accountable for all this. So, you need to make sure they are accountable if your system is down for any length of time or has degraded performance. Typically, the industry standard is that the system will be up and working at least 99 percent (99.9 percent preferred) of the time if not greater. If the vendor doesn’t meet that metric then there needs to be a financial penalty for the vendor.

Vendors infrequently offer to penalize themselves for their mistakes -what a surprise! So, if there aren’t already metrics for service performance with associated penalties for noncompliance, then the onus is on you to make sure you are protected.

Can you get out of your contract?

In a perfect world, you and your vendor partner will have a wonderful relationship running your cloud-based software from their hosting center, everything will be beautiful, and there will never be cause to get upset. However, keep in mind that the monthly software fee and hosting contract can be fairly long-term. Some vendors set periods in terms of years, and if you decide to get out early then there could be an associated penalty.

But what if the vendor doesn’t do their job, what if the system is chronically down, or they don’t return phone calls or they don’t take care of you? There needs to be a boiling point defined, where basically you have had enough and, in this case, the vendor should let you out of your contract, no strings attached. You will probably need to negotiate with the vendor what is a chronic problem, but at the end of the day, they need to give you the right to cancel the contract if there truly are chronic problems.

Lessons learned

As I assist groups and DSOs with evaluating new cloud-based dental software a big factor in pulling the trigger on a deal is if a potential vendor will be a good long-term partner. And part of this question can be answered by a deep dive into their contract before making a final decision. I was negotiating with one vendor on behalf of a client and when I asked the vendor about structuring some additional cloud contractual assurances. I was told that “they were in business for a number of years, had a stellar reputation, many customer referrals and I really didn’t need to question their contract terms.” When they wouldn’t work with us on the contract, we decided the group could be better served long term by looking at another vendor who recognized the importance of contractual assurances when it comes to cloud based agreements