The project agreement process regarding Enterprise Resource Planning/ERP software that is of crucial importance for businesses requires an extensive cooperation of the Company and the Software Company.
During ERP Project Agreement negotiations, the Company should thoroughly analyze the challenges of adapting software while the Software Company should be aware of the Company procedures. This two dimensional process requires the cooperation of both Parties. In other words, the principle, “the more provisions against the other party, the better”, does not apply to ERP Agreements. This is because failure of an ERP project is not a matter of a penalty clause or damages. Execution phase of an ERP Project Agreement may require a period of time from 3-4 months to a year, based on the scale of the project; and the implementation phase may last between 3-4 months to 1-2 years. For big projects, the term of the project may even be longer. Therefore, failure of such a project will mean a waste of substantial amount of resources, great disappointment and a waste of time in terms of keeping up with technological developments. In summary, failure in an ERP project will weaken the competition power of a company. No amount of money can compensate for such a loss. Therefore, the main goal of the Parties should be the success of the Project. Even the statements in the Agreement should hold positive connotations rather than negative and stay focused on the success of the project.
An ERP Project Agreement has two main components: the Agreement and its annexes. While the Agreement sets forth the fundamental rights and obligations, the annexes include more technical provisions to be referred to in case of need.
If the Parties agree on and the Project agreements include the following issues, potential disputes and disappointments that may arise in connection with the project will be minimized:
- Clearly defining the scope of the license granted
- Working out the scope of use considering the company structure and operational structure of the Customer
- Defining the phases and scopes in consulting part
- Agreeing upon acceptance and payment procedures
- Clearly defining the responsibilities of the project teams
- Warranty terms
- Intellectual property rights on software and developments
- Delivery methods
The integral parts of ERP projects are future license needs, updates of Software, making modifications to Software in order to meet company needs and solving instant software bugs. All these issues should be regulated as annexes of the agreement.
Making sure that the services and issues such as training or support, which can be regulated in the annex of the Project Agreement or under a separate agreement, meet technical requirements such as SLA and include legal arrangements and rights is of utmost importance to receive the benefits of the investment made.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.