Enterprise Software: Warranty Woes - ' Who'

Who should be on the hook for software flaws? Suppliers? You? At issue is a fundamental question about the definition of software.

Is software a tool, or is it clay that customers mold? Is it different from other products? Is software intellectual property that operates under new rules?

What would be the cost of producing near-flawless software? Should software vendors be responsible when integrators botch implementations?

Ed Hansen, a partner at Shaw Pittman, a law firm that negotiates enterprise software contracts, says there are no quick answers. For starters, software is set up so it operates against documentation that details the type of hardware needed and outlines how it should work. Details aren't terribly specific and usually underestimate the hardware costs involved with an implementation. Without documentation indicating how SAP works in a shop with, say, Oracle databases and Microsoft operating systems, there's no warranty.

"Sometimes warranties and performance guarantees are invalidated if the software is used with any product not provided or approved by the vendor," says Hansen. "Clearly, in the current environment this is a huge hole."

Nevertheless, there are some protections customers can negotiate-especially large companies that have leverage over software vendors due to the millions of dollars at stake. Depending on the size of a deal, Hansen says customers should get coding-defect protection, either in a warranty or in the maintenance agreement for a fee. For complex deals such as a worldwide installation of a human-resources application, the project should be accepted in phases to ensure the software works as promised. Money should be paid out only after stress tests in the customer's environment prove the software works as it should.

Customers should also be wary of money-back guarantees. "As a software user, you want to know that a problem will be fixed, not that you'll get money back," says Hansen. He advocates that customers include coding fixes in the maintenance agreement.

Next Page: Microsoft and JetBlue speak.