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20/02/2020

Jonathan Batho-Negotiating The Minefield Of Information Technology Contracts

As the technology sector presses further into business functions, processes, management analytics and even artificial intelligence (AI) enabled competitive advantage, businesses are required to adopt appropriate technology solutions in order to remain relevant, effective and profitable.
Contracting for these dynamically evolving systems and consumption-based landscapes is a minefield of complexity and frequently involves a significant level of commercial exposure.
Traditional corporate legal departments are distracted away from the critical elements because techie concepts and terms are typically outside of their comfort zone, and/or area of expertise. Instead they engage vigorously on terms relating to risk allocation and the consequences of failure, their more comfortable areas relating to limits of liability, indemnities, termination and warranties.
I concede that these terms and conditions are an indispensable foundation to the parties' engagement, however suggest that they consume an amount of time and focus that is inversely proportional to the risk that they mitigate or value they create.
The IACCM (International Association for Contract & Commercial Management) in their report, most negotiated terms 2018, propose that many of today's business to business negotiations fail to achieve their purpose of delivering mutual benefit. Having insight from more than 2100 organisations, IACCM confirms that limits of liability, indemnities, termination and warranties occupy four of the six most negotiated contract terms. (One needs to be mindful that this is to the exclusion of provisions relating to scope, responsibilities, price, delivery, performance and data protection & security).
In my view, the former historically power-based negotiations are able to be efficiently concluded and dispatched if the parties arrive at the table with an intent to be reasonable and apply accepted market practices.
What's really important is ensuring that you get what you signed up for, are able to manage an inevitable amount of change with a reasonable level of flexibility, commercial transparency and certainty, and protection from regulatory and third-party threats.
Software houses will attempt to prevent customers from cancelling licenses they no longer need (thereby reducing annual maintenance), or transferring them either to another subsidiary or another entity acquiring a subsidiary, or swapping them for a different type of license that they do in fact need. The list abounds.
Infrastructure and cloud providers will similarly attempt to impose minimum revenue commitments, preclude customers from reducing consumption-based services, dilute their performance guarantees and/ or impose unreasonable notice periods for the termination of commodity landscapes.
Consulting and implementation firms have their own recipe for avoiding delivery accountability and exploiting commercial loopholes.
These are the important items that need to be negotiated at the time of procurement, when customers have leverage.
Resolving these challenges in order to deliver value adding technology solutions to your business requires experience and expertise together with negotiating competence. The two ways of fulfilling this requirement are to either recruit someone internally or engage a specialist.
Our technology team at Cox Yeats has more than two decades experience in procuring and contracting technology systems, infrastructure and services from all the major software, technology and consulting houses both internationally and locally. <
Please contact us should you wish to discuss your requirements. The Information & Communications Technology Team is headed by partner- Jonathan Batho. If you require assistance or advice regarding Information & Communications Technology matters, contact us on T: 031 536 8500 or E: jbatho@coxyeats.co.za

Jonathan Batho, Partner, Information & Communications Technology Practice, Cox Yeats Attorneys

 Jonathan Batho-Negotiating The Minefield Of Information Technology Contracts.JPG
 Jonathan Batho-Negotiating The Minefield Of Information Technology Contracts.pdf


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