Surviving an IT contract – a customer’s guide (part 1).

In part 1…

This is the first of a six part series intended to smooth the often-troubled waters of IT contracts.

Background.

Are you buying an off the shelf software product? Are you making a large financial investment in a new IT system? Whatever you are buying, it is vital that you sign an appropriate contract. If the IT system is high value or business critical your requirements are likely to be detailed and the contract will need careful scrutiny so that risks are identified and mitigated.

Who, what, where, when, how?.

What hardware, third party software, standard software, bespoke software or open source software is being provided? Which versions are being provided – do you know?If the new IT system will be a business critical system, you will need to attach a specification to the contract. This specification document should set out, in detail, your requirements both in terms of functionality and performance of the IT system.

Disputes.

• Most IT disputes arise due to misunderstandings as to what the system will do, when it will be delivered and how it will perform. If the specification is to be developed post-contract, special considerations apply and specialist advice should be sought early on in the negotiations.
• Will the supplier project manage the introduction of the new system?
• Will the supplier provide training and support?
• What services does the price include and are there any hidden extras?
• All services should be described accurately and comprehensively.
• When will the software be delivered? Or will the signature simply trigger a development process, with the end product being delivered some months in the future?
• Are there any restrictions on use of software?

Plan the plan.

If you are prudent, then you will negotiate a project plan and milestones for completion of any development work. The project plan should include key milestones and corresponding instalment payments. Other important considerations may include:

• Regular review meetings to identify and resolve problems before they escalate out of control.
• Liquidated damages to compensate you for delays in delivery. These should be reasonable estimates of losses that would be suffered in the event of delays. They must not be penalties.
• A long stop date for the project to be completed, failing which you should have the right to terminate the contract.