When Vendors Request NDAs
Vendors typically ask for NDAs in these situations:
Product Demo
Before showing proprietary technology, features, or roadmap. Usually reasonable but should be limited to the demo content.
Pricing Discussion
Protecting special pricing, discount structures, or deal terms. Common but watch for broad definitions.
Technical Integration
Sharing APIs, specifications, or technical documentation. Mutual NDA often appropriate here.
Partnership Talks
Exploring reseller, OEM, or integration partnerships. Should be mutual if you're both sharing.
The Dynamic
As the potential customer, you often have leverage. Vendors want your business, so unreasonable NDA terms can and should be negotiated. Don't assume you have to accept their standard form.
Key Terms to Review
Vendor NDAs may include terms that create unexpected obligations. Watch for:
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One-Sided Obligations (When You're Also Sharing)
If you're sharing your requirements, data, or systems during evaluation, the NDA should be mutual. Don't accept one-way protection for their information while yours is unprotected.
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Your Data Becomes Theirs
Watch for language allowing them to use "aggregated" or "anonymized" data from your evaluation. Your test data may contain sensitive information even when anonymized.
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Broad Definition Including Pricing
If pricing discussions are confidential, understand what this means. Can you tell your CFO? Can you compare to competitors? Get clarity on internal sharing.
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Excessive Duration for Evaluation
A 5-year NDA for a 30-day product evaluation is overkill. The term should be proportionate to the relationship.
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Residuals Clause
Allows them to use ideas "retained in memory" from your feedback or use case discussions. This could mean your product ideas become their features.
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Carve-outs for Internal Stakeholders
You need to share with your evaluation team, IT, procurement, legal, and management. Ensure the NDA allows appropriate internal disclosure.
Should It Be Mutual?
Consider what information flows each way during your vendor evaluation:
| What Vendor Shares | What You Might Share |
|---|---|
| Product features and roadmap | Your requirements and use cases |
| Pricing and discount structures | Your budget and procurement process |
| Technical documentation and APIs | Your system architecture and integrations |
| Customer references and case studies | Your business processes and pain points |
| Implementation methodologies | Your data for testing or POC |
Rule of Thumb
If you're sharing anything beyond basic contact information, push for a mutual NDA. Your evaluation data, requirements, and feedback are valuable - protect them.
Vendor NDA Red Flags
Data Rights Grab
Watch for language like:
- "Vendor may use aggregated, anonymized data for product improvement..."
- "Customer grants Vendor license to use feedback and suggestions..."
- "Data provided for evaluation may be retained for analytics purposes..."
Your test data and feedback should not become their property. Negotiate these out or ensure they only apply post-contract with your consent.
Competitor Restrictions
Some vendors try to prevent you from evaluating competitors:
- "Customer shall not share Confidential Information with competing vendors..."
- "Customer shall not use Confidential Information to evaluate alternatives..."
You should be able to run a fair evaluation process. These restrictions are unreasonable and should be rejected.
Hidden Terms of Service
Some NDAs incorporate their full terms of service by reference. This can include:
- Limitation of liability for their products
- Indemnification requirements
- Arbitration clauses
An NDA should be about confidentiality only. Commercial terms should be negotiated separately when you actually buy.
Your Negotiation Leverage
As a potential customer, you have more power than you might think:
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They Want Your Business
Vendors have sales quotas and want to move deals forward. Reasonable NDA changes rarely kill deals.
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You're Evaluating Alternatives
You don't have to use their product. If they're difficult on the NDA, imagine how they'll be as a vendor.
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NDA Issues Signal Vendor Culture
How a vendor handles a simple NDA negotiation tells you a lot about how they'll handle contract disputes or service issues.
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You Can Propose Your Own
Many companies have their own standard vendor NDA. Propose using yours instead of negotiating theirs.
Practical Tips
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Ensure Internal Sharing Rights
You need to share with your evaluation team, procurement, legal, finance, and executives. Make sure the NDA permits this without requiring written consent each time.
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Match Duration to Relationship
A 30-day POC doesn't need a 5-year NDA. 1-2 years is reasonable for evaluations. Longer terms are appropriate for actual partnerships.
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Reasonable Return/Destruction Terms
30 days to return or destroy information is reasonable. "Immediately" or "within 24 hours" is not practical for enterprise environments.
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Keep NDA Separate from Commercial Terms
Don't let them sneak commercial terms into the NDA. Liability caps, indemnification, and similar terms belong in the service agreement.
Using Your Own Vendor NDA Template
Many organizations have their own standard NDA for vendor evaluations. Benefits include:
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Already Approved by Your Legal
Using your template means no internal review cycle. Faster time to evaluation.
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Consistent Terms Across Vendors
You know exactly what you've agreed to with each vendor. Easier compliance and tracking.
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Fair and Balanced
Your template is designed for your interests. No hidden terms favoring the vendor.
Pro Tip
When a vendor sends their NDA, respond with: "Thanks for sending this. We typically use our standard vendor NDA for evaluations - would you be open to using ours instead? It's balanced and our legal has already approved it, which will speed things up." Most vendors will accept.
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