Statewide HIO Contract Negotiation with Axolotl, Inc.

1. Statewide HIOContract Negotiation withAxolotl, Inc. Statewide HIO Joanne Rimac Natalie Schwartz, M.D. Axolotl, Inc. Yolande Calhoun Chris Davis, M.D. Kyle Johnson Med. Inf. 408 Project #4 March 8, 2011

2. Overview of Key Points • Customer • Cost Reduction • Payments and Deliverables • Acceptance Testing • Vendor • Conflict of Interest • Source Code Escrow • Technical Support

3. Statewide HIOContract Negotiation Key Points Joanne Rimac Natalie Schwartz, M.D. Med. Inf. 408 Project #4 March 8, 2011

4. Cost and License Terms • Statewide HIO’s Position • Dependence on government funds and value to participants • Requesting: • 20% reduction in one time and annual recurring costs • Conversion of annual subscription (term) license to a perpetual license agreement • BATNA: shift negotiations to main competitor (Medicity) • Willing to concede fee structure of future support services • Axolotl’s Position • Initial offer already represented a 25% discount off list pricing • Will flip the license from term to perpetual license model • Will only concede a 10% reduction in license and implementation fees, with a recalculated adjustment of annual software maintenance fees

5. Payments and Deliverables • Statewide HIO’s Position • Accountability to stakeholders, Governor, and ONC • Release process of federal grant money not under our control • Requesting: • Tie payments to completion of work deliverables, rather than vendor payment schedule (Axolotl’s milestone based schedule) • Extend payment period to 45 days from the date of invoices • Propose a third party escrow account • Axolotl’s Position • 45 days after invoicing is reasonable and can be taken off the table • Agree payments should be tied to milestones • 3rd party mediator / escrow adds unnecessary expense • Will work with HIO to clearly define milestones and issue resolution

6. Acceptance Testing Statewide HIO Position: • The User Acceptance Testing objectives include validation/verification of the following: • System requirements and design, functional requirements, interoperability, integration and adapter, data standards and aggregation, analytics and reporting, privacy and security authentication and disaster recovery. • Statewide HIO is committed to delivering a reliable and user-friendly system to its stakeholders upon initial implementation of the service • Statewide HIO proposes a sixty (60) day user acceptance time frame from the Delivery Date Axolotl’s Position : • Axolotl would like to maintain it’s reputation of collaboration and attention to detail throughout the user acceptance testing phase • Axolotl proposes a user acceptance testing time frame of 10 days from the Delivery Date

7. Axolotl, Inc.Contract Negotiation Key Points Yolande Calhoun Chris Davis, M.D. Kyle Johnson Med. Inf. 408 Project #4 March 8, 2011

8. Conflict of Interest Axolotl: • Axolotl seeks a strong partnership with Statewide HIO • In the spirit of partnership, Axolotl disclosed the former relationship of Ms. Kyle Johnson to Dr. Natalie Schwartz from Statewide HIO • Axolotl is asking the HIO to determine if Ms. Johnson should remain on the account or not Statewide HIO: • Due to the fact that Statewide HIO is funded by tax payer dollars, the HIO is reluctant to enter into any relationship that could cause a conflict of interest now or in the future • Statewide HIO is concerned about losing Ms. Johnson as a valued member of the team, but feels it has a civic duty to put the potential conflict of interest first

9. Source Code Escrow Contract asks for temporary access to source code if business critical errors are not resolved in 30 days Axolotl: • HIO does not have programming expertise • Time consuming • Cost prohibitive • For low cost/high benefit trade, Axolotl offers to host the escrow Statewide HIO: • Needs guarantee that business critical errors are corrected or workaround developed • Concern about access to source code should bankruptcy occur • Requests third party execute escrow services for source code

10. Technical Support Contract standard support specifies that the vendor is to provide telephone and e-mail technical support 24/7 and 365 days/year. • Axolotl • Committed to providing support to customers • Desires not to change contract language • Risk of increased costs in order to support level of support required by customer. • Statewide HIO • Add call center hours of operation into contract • 24 hour problem resolution • Unlimited technical support contact for first year

11. Resolution of Issues

12. Cost and License Terms Resolution • Statewide HIO rejected Axolotl’s offer of a 10% discount off the software license and implementation fees, provided a counteroffer of a 15% discount, and took its offer of carving out increases in future annual support fees off the table. • Statewide HIO used its BATNA, and the breakthrough strategies of “Going to the balcony”, “stepping to the side”, “reframing”, “the power to educate”, and “build them a golden bridge” throughout these back and forth negotiations • Axolotl agreed to flip the license from a term to perpetual model, but given that concession and the already steep discount it factored into its original pricing offer, they would not go beyond a 12% discount off the software license and implementation fees. • Both parties are committed to continuing negotiations on this issue, understanding the value of a strong partnership on this project

13. Payments and Deliverables Resolution • Both sides agree to extending the payment period from 30 days to 45 days from the date of the invoice to allow Statewide HIO additional time for release of federal funds • Both sides agree to tie payments to milestones • 50% payment on delivery of the software • 25% payment upon completion of acceptance testing (software acceptance) • 25% at final acceptance (45 days Post-Go Live acceptance) • Outstanding Issue: define a process for issue tracking and resolution • Third party mediator and escrow account will be unnecessary if parties can reach consensus on the outstanding issue. • Statewide HIO is comfortable with the agreements made to this point

14. Acceptance Testing Resolution • The process involved several stages of negotiating with Axolotl which resulted in an extended acceptance testing time frame proposed by Statewide HIO • The time frame proposed by Statewide HIO is 60 days from the Delivery Date • Axolotl is committed to ensuring the system is implemented without major flaws as their reputation may be at risk • Axolotl countered with a 45 day time frame for user acceptance testing from the Delivery Date. Statewide HIO believes 45 days is adequate and will neither excessively shorten or extend user acceptance testing. Although this agreement required utilizing several steps in the negotiating process, Statewide HIO is very satisfied with the outcome.

15. Conflict of Interest Resolution • Through much discussion, Statewide HIO has determined that it would be best for the HIO to avoid any potential for conflict of interest as it relates to Ms. Johnson • Statewide HIO is asking that Ms. Johnson be replaced by another highly qualified individual to act as their sales/ account executive • Axolotl feels this is Statewide HIO’s decision to make. Axolotl believes it is important that the HIO feel confident in their partnership together. Axolotl is comfortable in the decision that has been made and is assigning Donna Smith to act as their new sales/account executive.

16. Source Code Escrow Resolution • HIO agrees to strike the sections pertaining to temporary access to source code provided Axolotl is committed to fix or workaround (else contract is breached) • Axolotl agrees to third party escrow service

17. Technical SupportResolution • Axolotl agreed to add technical support hours of operation to contract. • Axolotl agreed to provide 2 weeks of on-site technical support and unlimited contact for the first 60 days of operation. • Statewide HIO agreed to create an internal process to triage issues before contacting Axolotl. Only 2nd level and 3rd level issues will be addressed by Axolotl.

18. Questions?