Presentation given at Tilburg University on September 28, 2010 for the course "Contracts and IT"

1. IT PROJECTS, AND WHY IT
NEEDS LEGAL SUPPORT
Lecture at Tilburg Institute for Law, Technology and Society (TILT)
Tilburg, September 28, 2010
Frank Vogt.

2. 2
AGENDA
1. IT is everywhere!
2. Typical IT (& legal) issues
3. Phasing & characteristics of IT projects
4. Conclusion

3. 3
IT IS EVERYWHERE!
US corp by market cap (2010)

4. 4
HBR Blog

5. 5
MY OWN HISTORY

6. BAD NEWS ABOUT IT PROJECT AND CONTRACTS

7. 7

8. 8
TYPICAL IT (& LEGAL) ISSUES
Typical issues in IT
• Strategic fit (“alignment”)
• Sourcing questions
• Complex projects
• Does IT meet business
requirements (and/or should
should technology shape
corporate strategy?), e.g., new
products & channels, lower
cost, central/decentral
processes
• What should we do ourselves
and what should be
outsourced (quality, skills,
cost, flexibility, etc.,)
• “Zero defect” set-up
• Typica very long & complex
• Changing requirements
• IT, users, suppliers, etc.,
• Should be run as a
“military operation”
Potential legal
issues
• Business continuity
(especially when
outsourced)
• Intellectual property
(e.g., 3rd party
software)
• Ownership of assets
• Incentives &
penalties
• Termination
• Strategic flexibility &
confidentiality

9. 9
EXAMPLE OF AN IT ARCHITECTURE
• Several suppliers (KPN, GTECH/Spielo, SGI, Ordina, LogicaCMG, Getronics, etc.,)
• Very expensive
• Very long time-to-market
• Focus on core lottery system (ticketing?)
Strategic objectives
1. Shorter time to market
2. Lower cost
3. Lower complexity
4. Better service

10. 10
OUTSOURCING
Onsite
Offshore
Onsite: Various locations
(e.g., Netherlands)
 Retention of regional
business knowledge
 Continuity
 Local language
 Single point of contact
Offshore: SE Asia,
China, Africa
 Lower cost
 Resources
 Quality
Nearshore
Nearshore: Spain,
Canada, Mexico
 Easier Travel
 Cultural
Similarities
 Time Zone
 Nearshore
technical skills to
deal with show-
stoppage
situations Source: prof. F. Harmsen (Maastricht University)
Close shore

11. 11
ZERO DEFECT SET-UP OF IT PROJECTS
1. Defined business case with measurable business objectives
2. Continuous monitoring of business case by top management
3. Redesigned business model, prior to IT implementation
4. Synchronised planning of application and infrastructure with clear milestones
& deliverables
5. Available expertise on project management and IT solutions, right mix of
internal & external resources
In case of multiple locations:
6. Definition of common data elements
7. Developed common prototype before roll-out

12. 12
ORGANISATIONAL COMPLEXITY IT PROJECTS
Users
(Marketing & Sales, logistics,
finance & administration)
Project management
Project & programme
managers,
IT staff
Architects, analysts,
designers, programmers,
testers, network specialists,
etc.,
Other project team members
like trainers
Corporate staff
Legal, controlling,
procurement
Internal resources
External resources

13. 13
PHASING OF IT PROJECTS
Imple-
mentation
Test
(system
& user)
Build
Design
(FO/ TO)
Detailed
specifi-
cation
Contract
nego-
tiation
Bid eval-
uationRfP
RfI/
Draft
RfP
In case (part of) IT project or
operation is outsourced

14. 14
PHASING OF IT PROJECTS (2)
Contract
nego-
tiation
Bid
evalation
RfP
RfI/
Draft RfP
May (should?)
take 1 to 2 years
Characteristics & objectives
• Information on available solutions
• Feedback of potential suppliers
• Address specific topics & issues
• Determine next steps & timeline
• Clear objectives
• Complete & consistent functional/
technical, financial & legal framework
• Right level of detail
• Evaluation process
• Evaluate bids on determined criteria
• Discuss identified issues
• Determine on appendices
• Negotation on (interdependant) issues
Legal involvement
• Set-up of legal framework with
management
Strong advice
• Draft contract (with mandatory
clauses)
• Extensive analysis to cover all
potential risks (technical,
organisational, legal, political)
• Contract evaluation process
• Evaluation of legal response
• Clear and workable contract
• Completeness and consistency
of contract, including schedules

15. 15
TECHNICAL/FUNCTIONAL, LEGAL & FINANCIAL
FRAMEWORK
Technical/functional
• What do we want, e.g.,
• System supporting current processes
• Outsourced activities
• New processes / technologies
• How clear are we about (future)
requirements?
Financial
• How do we determine a fair price
(e.g., for the business case and
evaluation)
• What financial model provides the
supplier with the appropriate
incentives?
• How do we manage the cost (and
how do we prevent unpleasant
surprise about unclear requirements)
Legal
• How are technical/functional and
financial requirements translated
into clear and consistent legal
clauses
• What level of detail is required for
the legal contract
• Which requirements are potential
legal isses (which can not be easily
handled by the contract)

16. 16
PHASING OF IT PROJECTS (3)
Implemen-
tation
Test
(system
& user)
Build
Design
(FO/ TO)
Detailed
specification
Characteristics & objectives
• Detailed description of (current & future)
business processes, products, channels
to be supported by the new system, to be
agreed upon with user organisation
• IT translation of these specifications into
functional & technical design, in order to
instruct software & hardware developers
• Development of IT solution (e.g., software
programs) based upon FO/TO
• Test of the new system
• IT dept (is it working properly?)
• User dept (is it what I wanted?)
• Migration of data
• User training
• “Go Live”
Legal involvement
Depends on the contract and the
behaviour of all parties involved
• Project delay (e.g., penalties)
• Completeness of contract &
schedules
• Changing behaviour of parties
(in line with legal roles &
responsibilities as well as
“spirit” of the contract)
• Changing strategic objectives
of one the parties
?

17. 17
CONCLUSIONS
• IT is strategic for almost any organisation (now & in the future)
• Sourcing of IT functions will remain an important issue for the future
• IT projects are very complex and difficult to manage
• Legal issues should be addressed as early in a project as possible
(make sure that legal is involved)
• Prepare a (draft) contract before a supplier is chosen (please)
• Bring legal contracts in line with the (strategic) objectives of an IT
project
• Use common sense