Consultants, at least the successful ones, earn a living selling their knowledge, services, intellectual property and the like to a wide range of clients. Sometimes they sell even yours. So, when you’re hiring them, always ask yourself: “Is it OK if my consultant does the same type of project for one of my competitors?” The answer: It depends on the situation. And here’s why.
First, you must thoroughly understand the role your consultant is going to play within your organization. It’s important that you evaluate every pending consulting assignment to determine how the consultant will be used and to what type of information he will have access. If the consultant will be involved in anything related to developing unique processes, procedures or systems that will improve your company’s competitive advantage, be very careful. Don’t allow a situation in which your consultant can “create” the same thing for one of your competitors. Obviously, when a competitive advantage is at stake, extreme caution is in order.
When you first introduce your concerns, your consultant may balk at what he could interpret as an attempt to limit his ability to make a living. He will probably argue that the confidentiality agreement between him and your company provides all the protection you need.
But most confidentiality agreements will protect you only from disclosure of intellectual property. It won’t protect you from the consultant using his “learnings” in subsequent engagements.
Therefore, get your consultant to agree not to do a similar project for one of your competitors for one to two years. This gives you extra protection and time to leverage the money you paid in consulting fees into improved revenue, earnings and market position. To be sure, one of the challenges is that there can be a fine line between what your consultant owns and what you own.
Set Licensing Limits
Consultants come to an assignment with tools, techniques and knowledge and leave with improved tools, techniques and knowledge based on what they learned while working for you. There’s nothing wrong with that. Improved knowledge makes them more valuable to everyone. The rub comes when this “improved knowledge” of your internal systems is used to help one of your direct competitors better compete with you.
In some cases, your consultant may agree that you own the work product (and why shouldn’t you?) or grant you a license for its use. You still aren’t completely protected because the consultant can use that knowledge to do it all over again.
Or, if you have a nonexclusive license, the consultant can license the work product to others, including your competitors. So, at least limit the consultant’s licensing rights. It’s a good idea to get ongoing protection that the work or any of its versions, iterations, enhancements or concepts won’t be duplicated for one of your competitors for a specified period of time.
Of course, obtaining this competitive advantage protection can be difficult. The easiest time to get it is when you’re negotiating a new relationship.
But be prepared for strong objections. Take the time to carefully explain the significance of your request and the potential harm it can bring to your organization if the protection isn’t granted.
Be Flexible
Negotiating this protection will require some flexibility on both sides. You, as the customer, should be willing to limit the protection only to similar projects for your nearest competitors.
The consultant should recognize that you’re not severely limiting his ability to earn a living because he has many other potential clients. You’re asking only that the same set of services not be done for your direct competitors for a limited time.
Let’s not forget that we can be burned by our own acts of omission. To prevent a scorching, recognize the true objectives of our vendors: profits and risk avoidance.
Don’t buy the “trust us” fairy tale. Ensuring that our contracts have sufficient anticipatory protection is, or should be, the objective.
JOE AUER is president of International Computer Negotiations Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates users on high-tech procurement. ICN sponsors CAUCUS: The Association of High Tech Acquisition Professionals. Contact him at joea@dobetterdeals.com.
Copyright by Computerworld, Inc., 500 Old Connecticut Path, Framingham, MA 01701. Reprinted by permission of Computerworld.