Software Licensing & Master Service Agreements : Chicago Software Licensing Lawyer & Attorney : Sam Conforti Law Firm : Master Service Agreements, Negotiations, Outsourcing : Cook County, Illinois

Andy Patrizio reports for InternetNews.com on a new offering from Sun Microsystems that will allow software vendor’s customers to convert from an on premise version of their application to SaaS using existing technologies.  The good news is that this conversion can be done without rewriting code, which in some cases can take many engineers an inordinately long period of time to design and then test the new architecture.  This is all made possible through Sun’s new “virtualization service”.  Sun or a Sun partner will then host the application.  Of course the service only “supports applications hosted on a Sun server using Solaris, Solaris' Containers virtualization technology and xVM, Sun's virtualization software.”

The advantage to this service was explained by Vince Vasquez, business development manager for SaaS programs at Sun:

"People see the demand for on-demand but they are stuck with a year or more of development time without actually knowing if there's a market there for their product.  With virtualization, they can get into that market right now."

If this is of interest, I strongly recommend reading Patrizio’s article entitled, Sun Latest to Help App Vendors Get 'SasSy'.  In it Patrizio reports on the success to date of this service with a case study and also discusses pricing and Sun’s 90-day free trial offer.

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Before we discuss the enforceability (or lack thereof) of such agreements, it is probably best that we at least define our terms so we all know exactly what type of agreement we will be examining. Wikipedia has the following definition:

A clickwrap agreement (also known as a "clickthrough" agreement or clickwrap license) is a common type of agreement (often used in connection with software licenses). Such forms of agreement are mostly found on the Internet, as part of the installation process of many software packages, or in other circumstances where agreement is sought using electronic media. The name "clickwrap" came from the use of "shrink wrap contracts" in boxed software purchases, which "contain a notice that by tearing open the shrinkwrap, the user assents to the software terms enclosed within".

Click-wrap is the electronic equivalent of the shrink-wrap method which allows users to read the terms of the agreement before accepting them.

The content and form of clickwrap agreements vary widely. Most clickwrap agreements require the end user to manifest his or her assent by clicking an "ok" or "agree" button on a dialog box or pop-up window. A user indicates rejection by clicking cancel or closing the window. Upon rejection, the user can no longer use or purchase the product or service. Classically, such a take-it-or-leave-it contract was described as a "contract of adhesion, which is a contract that lacks bargaining power, forcing one party to be favored over the other". The terms of service or license do not always appear on the same webpage or window, but they are always accessible before acceptance.

As a contract negotiator by inclination, I have a natural aversion to such forms of agreements. Simply put, one cannot negotiate such agreements. I’m grateful that Wikipedia acknowledges that such forms of agreements in the past were called ‘contracts of adhesion’. Please note that in the past these types of agreements lacked the bargaining element; however these forms of agreements are evolving. The law has a term that may be applied to a vast number of these clickwrap agreements, Caveat Emptor, Buyer Beware.

Jason Haislmaier in his blog ThinkingOpen addresses the necessary elements for the ever-present “click-to-accept” contracts that many of us often face in his article How Do I Build an Enforceable Online Agreement? — Not (Always) the Way SalesForce.com or Google Would. I strongly recommend Haislmaier’s article. In it he discusses the American Bar Association’s Committee on Cyberspace Law and its year-long study regarding such agreements. Haislmaier discusses in depth the committee’s “bottom line” steps required in order to have an enforceable online agreement and adds some anecdotal evidence when online vendors might fall short of these steps. The four “bottom line” steps as espoused by the ABA’s Committee on Cyberspace Law are as follows:

1. The user must have adequate notice that the proposed terms exist;

2. The user must have a meaningful opportunity to review the terms;

3. The user must have adequate notice that taking a specified, optional action manifests assent to the terms; and

4. The user must, in fact, take that action.

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Well we’ve all guessed that the question in the title of this post was coming. It seems that the answer is obvious. As wages increase for the software engineers in India’s silicon valleys of Bangalore and New Delhi, what self-respecting cost-cutter wouldn’t look elsewhere? Not so fast my friends. For a full understanding of the pluses and minuses of a move to China read the article in the blog Recruiting in China entitled China Marches into Outsourcing. The author has an interesting insight into the workings and plans for China’s information technology outsourcing industry.

India was there before China with BPO, Business Processing Outsourcing. Their revenue for 2007, $18 billion, dwarfs China’s for the same period. The author does make an observation that some may take exception to regarding the ability to speak English. I leave it to the reader to make your own determination. Here is the direct quote:

With its history as a British colony, India has workers with strong English skills and familiarity with Western culture. That gives companies there a big edge when bidding for jobs that require reading reports and talking to Americans.

I always get a little nervous when a totalitarian dictatorship comes up with a “plan”, anyone remember Comrade Stalin’s 5 year plans? Well it appears that our friends in the PRC have come up with one called the “Thousand, Hundred, Ten” project. The title is derived from China’s plan to situate 1000 Chinese outsourcing vendors in 10 cities servicing 100 foreign clients. The plan targets foreign clients other than the current Asian clients and moves the vendors out of the bigger and more familiar Chinese cities of Shanghai, Beijing, and Shenzhen to the less costly towns for housing and wages of Wuhan, Jinan, and Changsha. Government incentives abound from two-year tax waivers to subsidies for employee training to cash infusions for certain industry sectors (e.g. $56 million for the animation industry in Changsha).

China does have some hurdles to overcome. Most of their current IT outsourcing is to Japanese firms. The outsourcers that have set-up shop in Changsha are relatively small and prone to failure. The work performed is not the glamorous engineering and design, but the more mundane coding and software testing. Consequently the talented engineers leave for the more exciting cities on China’s coastline with more opportunities.

Search, as you may, for any mention of the over 500,000 Chinese in re-education camps (we call these political prisoners) or for any mention of Tibetan monks being beaten, but you will not find it. I’d put that down as another hurdle China needs to overcome.

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The other day the Chicago Tribune picked up an Associated Press article regarding airline passengers in Europe and the use of cell phones.  It was reported that late in 2008 such passengers while flying throughout the 27 member European Union nations will be able to make cell phones calls and send text messages.  There are 2 main issues addressed in this article regarding this new offering.  First can it be done safely from a technological perspective, and second should it be done at all considering the disruptive affects of cell phone users to those in the immediate vicinity of the user.

As to the first issue, the EU is confident it can be done safely.  Cell phone usage will not be allowed during takeoffs and landings and may only be used above 10,000 feet.  The cockpit crew will have the ability within its discretion to turn off the service at anytime.  In order to avoid any interference with flight navigation each aircraft will be equipped with a “miniature cell phone tower”.  The tower will be linked to a satellite which will then be linked to a ground network.  The signal will go from cell phone to onboard base station to satellite to ground.  The on board base station prevents the individual cell phones from sending out indiscriminate signals, however one FAA study showed that there still is a slight risk that a cell phone might try to connect to a ground tower.  The EU stated that the system has been thoroughly tested and has even added safeguards against terrorism.

The second issue addressed in the article is a bit more tricky.  The airlines will need to strike a delicate balance between the cell phone users and those passengers wanting to sleep on longer flights or just seeking a bit of quiet from the hustle of the workday.  Lufthansa, the German airline, has chosen not to offer the service.  Their own internal studies have shown that their customers do not want the service.  I believe it was another German, Greta Garbo, who once famously said, "I want to be alone," spoken with a heavy accent which made the word 'want' sound like vont.  Some of the annoyances from this service are loud talkers, obnoxious ringtones, and calls during long night flights.  The author suggests instituting some rules of etiquette.  Now enforcing such rules is another thing.  Good Luck!

Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed

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Maybe you’ve seen this commercial. A maintenance man at a power plant is mopping the floor of the control room of a power plant. He accidentally knocks over a cup of coffee sitting on the control panel and the metropolis in the background suddenly goes dark. The maintenance man doesn’t panic. He quickly goes over to the ‘red button’, pushes it, and the “Energizer Bunny” suddenly drops down from his hidden compartment in the ceiling and attaches itself to the control panel. The bunny then begins to bag his familiar big bass drum ferociously. Sparks begin to fly and all of a sudden the city’s lights come back to life and all is well again. This is a light-hearted example of a very important issue.  The “Energizer Bunny” in this commercial is an example of the power plant’s Business Continuity planning. The point is that bad things happen and an enterprise has to be prepared to deal with these bad events.

The Blog 360⁰ Vendor Management has published a very helpful article regarding Disaster Recovery entitled An Outsourcing Vendor’s Business Continuity and Disaster Recovery Plan. In it the author discusses some essential points that any Outsourcer should consider when contemplating their Disaster Recovery Plan. Since the Blog 360⁰ Vendor Management’s stated purpose is “to impartially discuss the down-to-earth, day-to-day fundamental basics of outsourcing … thereby make you a more effective outsourcing leader”, I have deferred to their judgment and included this post in the Outsourcing category of my Blog. I would, however, like to point out that the following points seem to me to be universal (See the “Energizer Bunny” discussion above) and should be easily applied to any IT department other than an Outsourcing Vendor. The following are those salient points contained in the 360⁰ Vendor Management article cited above to consider for your Business Continuity Plan:

• Consider the Impact, not the Event - Generally speaking there are four types of impacts that you need to plan for: loss of people, loss of facilities/building, loss of connectivity, and loss of applications. Any given event can cause one or more of these impacts. For example, a political coup could cause your operations team to have insufficient quantities of personnel (loss of people) and loss of connectivity (if the telecommunications company shuts down). Plan for the impacts, not the disaster.
• Consider Time Frame of Impact - An impact can last 5 minutes, 50 minutes, 5 days, 5 months, or be permanent. When an event creates an impact, your plan should provide clear direction based on the expected duration of the impact.
• Have Clear Procedures - A plan that says “open new center in a hotel conference room” is insufficiently detailed. The plan should have clear procedures for retraining, relocating personnel, reconnecting systems, and procuring goods/services necessary to recover. For example, relocation of personnel should have a clear plan for sources of transportation, roadmaps with specific routes to take, and temporary housing.
• Plan for Staged Recovery - Few serious impacts can be instantaneously resolved. For example, telecommunications circuits are generally recovered one at a time. People will return to work slowly.
• Consider Side Effects - A major weather disaster is typically followed by disease. So, while a hurricane is unlikely to cause a loss of people, the cholera, stomach diseases, or other health concerns could.
• Test the Plan - Finally, test your plan at least once per year by first calling a pre-planned meeting and role-playing resolution and actions. Later, call an emergency meeting when leaders are not prepared. Take notes on the actions (do not critique in the middle - let the disaster and recovery unfold). Afterwards, analyze the actions and provide feedback. Expect your business continuity and disaster recovery plans to improve each time you rehearse.

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