“You may be thinking: but my company isn’t a software company. That may be the case, but the current business environment requires all leaders to view their companies as software businesses — and think like software executives. That doesn’t mean that you should stop delivering your current products or services. And it certainly doesn’t mean that you should suddenly start selling something labelled ‘software’. Rather, this approach recognizes a fundamental shift in the sources of value creation and competitive advantage toward software.” – Harvard Business Review
In the platform economy, developers are those parties who have created products or services they wish to offer on the platform. Developers will need to integrate their product offering, usually an app, into the platform. This necessitates that the platform provider allows developers to access and integrate into the platform. As such, the platform provider must ensure that there are clear terms and conditions upon which such access is granted and the terms on which any integration takes place, whether through an API or otherwise. This article is part of a series of articles, the Platform Economy Series, delving into the legal issues arising from the platform economy. In this article, we dig deeper into the issues discussed in our earlier article, specifically in respect of platform access terms and conditions and what platform providers should consider in launching the platform.
For a platform to succeed, it must demonstrate value to customers: the higher the value, the higher the critical mass of customers. Access to the platform means access to data. Platform access enables developers to gain significant insights into both the business of the platform provider and what the customer wants. This further allows the developer to explore innovation opportunities and develop apps that customers will find valuable. It is critical to the success of a platform, that the platform provider is successfully able to manage the relationship between the platform provider and multiple developers in order to achieve and maintain value creation, uniformity and also to mitigate the legal and commercial risks associated with granting developers access to the platform, and ultimately customers with access to apps or solutions.
The platform provider should ensure that by granting developers access to the platform, its contractual terms of access should include inter alia:
- design and integration requirements of the developer’s product and the platform;
- the use of any specific APIs;
- specific security requirements in accessing the platform and the commitments required by the developer to ensure the security of the platform;
- the commercial/revenue sharing arrangements;
- applicable service level commitments of both the platform provider and the expected service level commitments that the developer must adhere to;
- the marketing strategy and the commitment required from the developer;
- the obligation to comply with the applicable regulatory framework;
- acceptable branding and intellectual property ownership, including any exclusivity arrangements (in our next article we will provide more focus on IP and exclusivity considerations); and
- termination and post-termination rights of both parties.
It is also critical to the success of a platform that such terms and conditions not only cover regulatory risks around data sharing but also covers data sharing rights and the responsibilities of the developer vs the responsibilities of the platform provider. A critical part of this aspect of terms and conditions goes towards the issue as to who “owns the customer”’. In a regulated environment, data sharing provisions become all the more significant as too are the competition law considerations. We will delve deeper into this specific issue in a future article in our Platform Economy Series.
Our specialist team at ENSafrica have deep expertise in developing terms and conditions that apply between platform providers and developers, and have assisted a number of clients in drafting such terms and conditions both from a developer and platform provider perspective. In light of our deep commercial expertise, we also ensure that such terms and conditions are drafted in a manner that is not only legally sound but which seeks to achieve maximum commercial advantage for our clients.