All contracts have a bias towards
Entering into any contractual relationship has inherent
risks. Embarking on an IT project without due consideration
and the negotiation of adequate terms of the contract
only increases the risks to the success of that project.
All too often, it is only after problems arise with
the project, the customer reviews the contract and understands
the true strength or otherwise of its position.
Ordinarily no business would enter into any contract
without ensuring that:
- It reflects the agreement reached
by both parties
- The respective parties responsibilities
- It is clear and unambiguous
- There are terms to cover
- services/implementation as well
- licensing and maintenance
- The terms are fair and reasonable
Unfortunately, these basic considerations
are often not followed in IT contracts.
The "Lets just get on with it" mentality
In many cases, suppliers try to persuade customers to
'sign up' quickly, not allowing time for a thorough
review of the standard contract.
Sometimes even the customer's own staff feel that negotiation
and review of contracts is a waste of valuable time.
However, our experience is, that time taken to negotiate
and reach an agreement so that a properly formulated
contract is signed, will not be considered time wasted
when the first problems occur.
It is critical to the business to prepare a properly
drawn out and negotiated contract for any IT related
project. Anything else adds risk to the project as well
as the business in the event of system failure.
Steps to take
Before signing a contract, the customer should be satisfied
that not only are the basic considerations adequately
dealt with, but specifically the contract should include:
- A functional specification of the
system or other document to be used as the 'benchmark'
against which the system will be tested and accepted
- Licensing provisions acceptable to
the customer with no 'hidden' or unexpected costs
- A commitment from the supplier to
meet the detailed Implementation Plan with timescales
convenient to operation of the customer's business
- Provisions for support and maintenance
of the whole system including acceptable Service Level
Agreements to ensure that an effective support, maintenance
and development mechanism is in place
- Where possible, a fixed priced contract
or alternatively include all known costs including
costs of licences, hardware and other equipment, installation,
training and consultancy services
- Payments to the supplier only to
be against the successful outcome of identified milestones
in the Implementation Plan
- Adequate Warranty periods for the
- Warranties from the supplier including:
- Operation and Functionality of
the system against the 'benchmark'
- Performance levels
- Compatibility with other systems
It is essential to minimise the risks
for the client by having a comprehensive contract including
adequate redress against the supplier in the unlikely
event of a dispute arising.
AIT has the knowledge and practical experience to assist
clients during the demanding and difficult process of
negotiating the contractual and commercial terms of
the agreement. This can occur as part of a selection
process or as a quite separate process where the client
has already decided on a preferred supplier. This could
also include the renegotiation of existing agreements
With an unbiased and properly negotiated contract being
agreed and signed, there is perhaps a greater chance
of it being filed away in a cabinet, never to see the
light of day again!