Column: Contract negotiating for online services

Implementing an Internet-based commercial site is fast becoming a growth industry in New Zealand.

Implementing an Internet-based commercial site is fast becoming a growth industry in New Zealand. With more people using the Internet, more products coming online and more companies looking to provide online data, the opportunities for becoming an Internet-based information broker are rapidly increasing. However, in order to build a successful business, you have to deal with a number of different groups: data providers, designers and ISPs. The field is so new and the technology is changing so fast that nailing down specifications and agreeing on terms and conditions (not to mention prices and fees) can be a nightmare. Here are a few tips on how to get started.

Building the Strategic Plan: Before you get too far, create a realistic strategic plan that covers items such as product specification, RFP preparation, contract negotiation, implementation, staffing and marketing. The exercise will help uncover all of those items, such as budgeting time for project management or designing the "look and feel" for the site, that can come back and haunt you as you develop your programme. Nobody has ever gone broke by doing a comprehensive planning exercise. Plus a good strategic plan can be incorporated into the scope of work and the eventual contract.

Project Specifications: This is where you get really technical. You have to clearly set out what your site will look like. This includes what and how much data will be offered, the formats in which the data will be delivered, how the database interfaces will work, how much traffic you expect, how you will track who uses what data and how you will manage the operation. These are areas where any grey spots will almost immediately cause project costs to escalate immensely. The tighter the project specifications, the lower the costs. Build a cost-benefit model if you can.

The Request For Proposal: Once the project specs are nailed down, you can put them into a request for proposals (RFP) and send it to likely vendors. Make sure that you spell out exactly what you expect them to bid on, how they should structure their proposals, and what the criteria for selection will be. Even with a well-crafted RFP, some vendors will come back with solutions that offer alternatives to your original ideas. Make sure you budget enough time to fully investigate these options.

Start with a small list of RFP recipients, give them plenty of time to respond and expect to see alliances and partnerships. Few vendors have all the skills required for a comprehensive commercial site so designers and ISPs may team up to provide an integrated solution. Don't be shy about talking to different groups about mixing and matching solutions. Make sure that your RFP reserves the right to take components of bids.

Vendor Selection: Once the proposals are in, study them carefully and put the results into a spreadsheet so that you can compare apples with apples. Look at capital costs, hourly rates and, most importantly, on-going costs. Some vendors might give you low development costs and then charge an arm and a leg for on-going services. If you want to enter a partnership with a vendor, make sure that you know all the costs up front. Again, any grey areas will surely come back and bite you.

Not all vendors will take advantage, but any uncertainty on your part will set off alarm bells on the vendor side and they will raise their rates to put them back into a comfort zone.

Contract Negotiation: This is where the project specs are paramount. Make sure you know exactly what you want, what the vendors will provide and when and how much it will cost. There might even have to be some prototyping before you can agree on a final scope. Don't be in a hurry and be sure to talk to at least a couple of vendors on the short list. Chances are they will be willing to negotiate a little to get the business. And the specs will tighten as you analyse the proposals and take into consideration some of the ideas. In fact, you should be able to reduce the bids by clearing up any grey areas that you uncover.

Project Management: Don't forget project management. Once the contract is signed you will want to make sure that everyone (especially your own organisation) performs as required. This takes time, both yours and the vendor's. Ensure that the staff time is available. Lots of otherwise well-designed projects have gone sour without a strong oversight component.

As you might have noticed, these steps are no different from any other IT initiative. The issue here is that right now both the contractee and the contractor are breaking new ground with every project. Building the project will be a team effort and open and frank communication at every step is imperative. We will be seeing a lot of these projects coming online in the future, so the skill sets will only improve. But today, the field is wide open. So good luck and keep those project specifications as tight as possible.

(Phil Parent is Computerworld's Internet editor, a geographer and Web site consultant. Email him at

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