Contract attorney offers tips in case of IBM-Sun merger

Contract attorney offers tips in case of IBM-Sun merger

Now would be a really good time to negotiate a deal with Sun, Diana McKenzie says.

Diana McKenzie, head of the information technology practice at Chicago law firm Neal, Gerber & Eisenberg LLP, has specialized in IT contract law since 1987. On Monday, she spoke with Computerworld about what customers of IBM and Sun Microsystems Inc. need to know about contract law as IBM pursues its reported US$6.5 billion bid to acquire Sun.

If a company has contracts with both IBM and Sun, and the contracts have different terms, which one applies if the acquisition happens?

That, to me, is one of the more interesting things about this merger. If you buy another server, and you've got a Sun contract in place and an IBM contract in place, there needs to be a healthy discussion when you're doing an amendment about which contract you're amending. The customer may have a very different idea than IBM has as to which contract should apply.

Typically what happens is they create an entirely different contract in order to handle the amendments. If I have a contract with Sun, and Sun is acquired by IBM, then IBM is responsible for everything Sun was responsible for - with some exceptions -- under the contract. So if Sun promised me that for my $1 million per month I would get John Smith to appear on my doorstep every Friday at five o'clock to answer any questions, then John has to continue to do that.

How are the negotiating styles of IBM and Sun different?

There are very, very different types of contracts that the two companies have put forward. Sun has changed dramatically - Sun contracts used to be one of the tightest in the industry. So if somebody's got a really old Sun contract - and I'm talking vintage mid- to late-'80s, when Sun was basically the only player of its type in the marketplace, and there was really no competition - those contracts bordered on contracts of adhesion. They were so strict, so favorable towards Sun, that some lawyers would argue that they may not even be enforceable, they were so draconian.

In 2009, Sun has a very different kind of contract, and they have typically been more accommodating on their terms. IBM is somewhere in the middle - they tend to be fairly conservative in their contracting, but in their larger, strategic deals, they are willing to do some negotiation.

What sorts of personnel provisions can companies include in amending their contracts to ensure they continue to have access to the people they know?

We typically put those provisions in for any key personnel - it could be a service manager, or it could just be a person who creates interfaces, but you've got a lot of interfaces being created. It's anybody who's critical to your enterprise.

They're not going to guarantee they won't lay somebody off, but you can make it more painful for them to do so. You can demand, and most vendors will agree to this, that you get the first 80 hours of the new person's time for free if it's on a T&M [time and materials] basis. If it's not on a T&M basis, you figure out some kind of financial equivalent of that.

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