Being as how "Shop Talk" is about buying rather than building software, I thought it was time we talked about . . . buying software. There are a few simple but important questions that need to be considered during the negotiation and purchase phase of a software acquisition. These questions include: What do you get, what does it cost, when do you pay, and what is your fallback if something goes wrong? These questions are ultimately answered by terms and conditions recorded in legally binding agreements. Before we consider each of these questions, let's refresh our memory as to what comprises the overall transaction.

Usually, when a carrier purchases a core insurance processing system, say, a policy, claims, or billing system, from a vendor, it actually is buying three things: software, ongoing support for the software, and some services aimed at getting the software successfully installed and up and running. Of course, the carrier also may buy outsourcing and other services, such as rate, rule, and forms maintenance. So, at minimum, the carrier usually has to understand and reach agreement on the terms and conditions for three contracts: a software license agreement, a software maintenance agreement, and a professional or consulting services agreement.

A few years ago, I was working with a client that had a preferred hotel deal with a Holiday Inn Express across the street. I was visiting to assist with the software negotiation and met with some vendor folks, one of whom followed his introduction by asking: "So, are you [the client's] legal counsel?" To which I could not stop myself from replying: "No, but I stayed in a Holiday Inn Express last night."