What to consider when negotiating AI contracts

A lot can change in a year.

That’s why Bread Financial EVP and CTO Allegra Driscoll often gravitates toward one-year contracts when working with AI vendor partners.

“So much is happening in the environment. Technology is moving so quickly, and we want to make sure that we continue to create the best technical ecosystem that delivers against our business capabilities, and [are] having more frequent opportunities to pivot and refresh who we partner with,” she said.

Driscoll, who has been negotiating software and now AI contracts as part of her career for the past two decades, told IT Brew that she views partnerships with vendors as a “two-way street.”

“The best contracts reflect the way that you want that partnership to work,” Driscoll said. “That spirit of collaboration, that openness, that willingness to pivot, and that you plus ‘new company X’ are better together than apart.”

We caught up with Driscoll to discuss how she negotiates AI contracts.

This interview has been edited for length and clarity.

What’s top of mind when it comes to negotiating AI contracts?

One is flexibility. If we’re going to sign one-year contracts, working with a partner who is not willing to sign a shorter contract is a non-starter. We like to work with partners that are willing to experiment in our lab before we decide to scale in earnest, because there’s a lot that you can learn by getting hands-on with the technology.

And then just more broadly, openness—when it comes to architecture, data, data access—[is] really important. If you think about where you’re able to maximize the business value, it’s where you have a connected data ecosystem, and so if you buy solutions and those partners are not willing to be open with the data that lives in that environment, then you’re pretty limited in your ability to then look across the organization and maximize the value of that purchased piece of software.

Are there any common mistakes tech pros make during the negotiation process?

The easiest mistake, given how much is going on in the news today, is to feel like, “Oh, we’re not using piece-of-technology X”…and to get into that chase-the-shiny-object mode, and be focusing on the tools over the business objective.

I would say think about your AI investments the way that you would think about your technology investments overall, which is tech is only as good as the business objectives it delivers, and AI is just sort of another tool in the toolbox to reimagine how customer capabilities, partner capabilities, you know, associate capabilities can be can be brought to life.

How should businesses go about preventing vendor lock-in?

Sometimes vendor lock-in is unavoidable in a practical way, at least in a sort of near-term horizon. So, it may be an unpopular opinion, but I think it’s okay to decide that you have a great partnership, they have a great product, and together [you’ll] be able to deliver on important business priorities at a price that makes sense and a level of risk that you’re comfortable with. I think the key is to continue to evaluate that lock-in on a fairly regular basis to determine, “Do I want to continue? Is this lock-in continuing to provide business value, or do I need to start to make a plan to unwind that lock-in?”

One of the things that we have started doing more and more, though…is pick the spots where you’re trying to deliver something that is really differentiated for your business and take a champion-challenger approach. Have two providers in the space and give yourself, from an architecture design perspective, that right to spend a little bit more because the area is so important and you can’t afford to have that vendor lock-in and you can’t afford to be late as business priorities shift.

It’s okay to make some of those decisions, but it’s important to be intentional about it. Pick the spots where you say, “All right, lock-in cannot happen in this space, and so we’re going to put two different investments against the same business objective.” And then you have full ability to throttle back and forth. And in other places, accept that there is a degree of lock-in, but give yourself the flexibility to renew that commitment with each of your partners on a regular basis as the world changes quickly.