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Summer 2022 Updates to Ratings: IT Contracts

Otto Hanson, JD Jun 17, 2022 11:08:26 AM

TermScout periodically reviews contract scoring to ensure that its published favorability ratings on more than 1,000 public IT contracts are as up-to-date and accurate as possible. TermScout pushed its summer 2022 scoring updates live on Thursday, June 16, 2022 at 8 p.m. MST. This article summarizes the process employed to ensure scoring is as accurate as possible, along with some of the high-level changes.

TermScout’s favorability ratings are designed to help users understand how much a given contract favors each party, and the extent of such favorability. Scoring is based on the answers to hundreds of substantive questions that TermScout extracts from the contracts it reviews.

Process

TermScout employs a rigorous process to ensure scoring accuracy, including but not limited to the following:

  1. Analysis of its own database of IT contracts, including hundreds of negotiated contracts and more than 1,000 public contracts. 
  2. Analysis of market benchmarks such as the World Commerce and Contracting as a Service Principles, the Bonterms Cloud Terms, and the AWS Marketplace Standard Contract.
  3. Consultation with legal experts on TermScout’s product advisory council, including top lawyers from both the buy- and sell-side of some of the largest commercial contracting teams in the world.

 

Notwithstanding these measures, rating contracts based on party favorability is art, not science. Always consult an attorney before making decisions about contracts.

Ratings Updates

Generally speaking, the summer 2022 updates made the overall rating of most contracts roughly 10% more vendor-favorable.

IT Contract Overall Ratings: Pre-June '22 Update (Vendor Forms)

Screen Shot 2022-06-17 at 12.33.47 PM

IT Contract Overall Ratings: Post-June '22 Update (Vendor Forms)

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The following list provides an overview of some of the more substantive clauses that were updated in TermScout’s IT contract rating algorithms:

  • Complete disclaimers of all liability by vendors
  • Vendors accepting unlimited liability (or super caps) for data-related liabilities
  • Failures of vendors to provide any exceptions to the cap on their liability
  • Failures of vendors to provide any exceptions to the waiver of indirect damages
  • Vendors requiring customers to waive one or more forms of direct damages
  • Requirements that customers indemnify vendors for breach of any provision in the contract
  • Failures of vendors to provide adequate protection of customer’s confidential information
  • Provisions from vendors that involve broad licenses to or ownership of customer data or IP
  • Non-solicits restricting customer
  • Non-competes restricting customer
  • Exclusivity clauses
  • A number of more minor updates across a variety of clauses

As a result of these changes, some companies moved up or down relative to their peers in our category rankings.

For example, SAP — which accepts unlimited liability for data-related claims in its General Terms and Conditions for SAP Cloud Services, a concession offered by only 1% of vendors reviewed by TermScout — moved into the #1 spot for having the most customer-favorable contract in the Cloud Platform as a Service (PaaS) category. Microsoft Azure, Snowflake, IBM, and Google Cloud are all close behind. 

AWS, notably, slipped down to the bottom quartile of the pack, with a new rating of 70% Vendor Favorable. This is not surprising, considering the AWS Customer Agreement offers no limits on its customers’ liability, no protection of its customers’ confidential information, and requires that customers waive certain direct damages.

Updated Contract Ratings for Top PaaS Vendors

Screen Shot 2022-06-17 at 10.55.33 AM

TermScout’s category rankings are available to any user with a Scout or Pro plan, starting at $99/mo.

If you have any comments about our scoring, we’d love to hear from you. Write to us at info@termscout.com.