Mistakes Technology Companies Make

In working closely with technology suppliers through the years, I frequently find that these organizations are making common mistakes which devalue the business, leave earnings on the table, or jeopardize their long-term health. So this special article explains the top 10 of those mistakes that will assist you to avoid making them.

1.) With a form license and/or services arrangement which doesn’t fit your business model

Capturing exactly how you wish to supply your goods or services to your client, allocating the risks, and establishing each party’s obligations and rights, isn’t a simple or quick procedure. Replicating another firm’s form agreement not only exposes you to risks you can not know of, but possibly violates another firm’s copyright in their arrangement, and increases the risks outlined at the other points of the list. Having a customized arrangement created for you that aligns with your business processes, mitigates your risks, and addresses the laws that apply in your jurisdiction for your business is an integral part in running a successful technology business.

2.) Undervaluing technology

What’s your technology worth? It’s a challenging question, and worth can be measured and determined in a variety of ways. Many new technology businesses feel compelled to undercharge for their technology in a bid to break into the marketplace. Although there’s certainly some merit in that, I see sellers consistently undervaluing what their technology is worth, leaving substantial revenue on the table. Understanding the impact and reduction to the client if they DON’T let your technology is the first key to pricing your goods. Additionally, under-pricing your merchandise can make an impression that the technology is”cheap” – not a tag that will build a favorable reputation of your organization in the long term.

3.) Offering liberal source code escrow release conditions

For software developers, you understand that your source code would be the “crown jewels” of your business. It’s the heart of your technology, representing months or years of your blood, sweat, and tears. However, many software companies are eager to give it away, for free, to their clients. How? By entering into a source code escrow agreement with a client and letting it be released to them in circumstances where the code still holds value for you. Many clients will need the source code to be released to them if you stop supporting the applications, but the intellectual property in the code might nevertheless be utilized on your other goods or technology, effectively giving your client the tools it needs to replicate your technology. Creating quite narrow and specific source code release conditions can minimize this effect.

4.) Using overly broad or abstract acceptance testing

It’s not unusual or unreasonable for clients to want to “kick the tires” of your technology before they pay for it. Problems arise if the customer has an irrational expectation of what the technology is supposed to achieve, and want to withhold payment, or force you to offer more services to fulfill that unreasonable expectation. This especially manifests itself if a client includes acceptance testing language in a contract that’s not tied to realistic and objective criteria. Even though it can be a laborious effort, taking the opportunity to objectify these criteria with the client in the contract can save you considerable time later on, and make you paid quicker.

5.) Giving away intellectual property ownership also liberally

Many technology companies create customized technology for their clients or make customized alterations to their current technology on behalf of a specific customer. And most clients assert that if they’re paying for it, they wish to own it. But giving your business’s intellectual property in these cases can prevent you from reusing it for other clients – effectively shutting down a possible source of earnings in the future. And lots of times, your clients may not have to really “own” the developments – a permit right can often work.

6.) Inadequate non-disclosure and non-compete agreements with contractors and employees

The technology business is among the most competitive industries in the marketplace. Why take a chance losing your competitive edge by not ensuring that your intellectual property, customer lists, trade secrets, and other sensitive information are appropriately protected through appropriate agreements with your employees, contractors, and vendors? Finding and utilizing some form arrangement that you saw floating around on the Internet somewhere may actually make things worse if you do not fully understand the conditions. Moreover, simple steps can be taken to make certain that whatever developed by your workers is, and remains your institution’s property.

7.) Not contracting clients to recurring support charges

Customers want and expect you will be there to support your product, help with problems, and supply them upgrades when you add features or fix bugs. Customers also expect you will regularly charge them for these services, so why do so many technology vendors sell a product to a client and neglect to construction regular and recurring support charges? Generally speaking, a technology vendor’s highest profit margins are accomplished through a support fee flow, rather than at the upfront license charge.

8.) Failure to provide detailed support and maintenance policies

Too often, after a provider’s technology is about to be licensed, determining how to encourage technology becomes an afterthought. General and non-descriptive duties like “providing phone and email support” and “supplying updates” are invitations for disagreements and missed expectations. When is telephone support is provided? How quickly will you respond to problems? What is considered an upgrade and what’s a brand new product for which you would charge the client individually? Oftentimes, you need your client to give you specific information about the issue before you are able to diagnose and repair it. Set the right expectations in your service and maintenance policies and prevent these problems in the future.

9.) Licensing technology also broadly

So you have landed that big deal with this huge customer. You have carefully priced the deal based upon your own expectations of how the client will use your technology – with a particular group within the client’s large organization. You are hoping that the achievement of the deal will result in higher adoption of your technology over the remainder of the business, and ultimately more revenue for you. Unfortunately, you later learn that this one group is sharing with your technology throughout the remainder of the business, with no additional license fees to you, and there is nothing you can do about it. Why? By failing to carefully and narrowly draw the license grant on your arrangement, you have unwittingly granted the whole company the rights to use your technology, and you have left a pile of money on the table.

10.) Failure to register national copyright for company-developed applications

Your organization has spent months, and possibly years developing the next-big-thing. You are out there licensing it to clients, fighting off competitors, and seeking to maximize your earnings. What would you do if a client was misusing your applications? What if a competitor has been copying parts of it to use in its own product? There are various strategies to respond to these difficulties, but among the easiest to way to fortify your claims would be to register a copyright for the applications with the United States Copyright Office. Registration provides you with an improved ability to have a court prevent using your applications, and a larger amount of damages that are recoverable. The best part is that enrollment is relatively simple and inexpensive.

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