WE DO IT when
we agree to get married to protect our personal assets, yet when we
enter a business agreement we fail to protect our corporate you-know-whats!
It’s the prenuptial agreement, a negotiable little contract whose
terms govern rights and responsibilities should the big contract - marriage
or outsourcing - not work out.
When
You Outsource
Take outsourcing: the vendor buys your processing equipment, transfers
your software licenses and hires your subject matter experts to run
the show. If the deal goes sour or ends naturally, consider the complications
in disentangling yourself from an IT outsourcing “marriage.”
A “pre-nup” can ease your divorce, providing a smooth, cheaper
return of the business back to the company or to another outsourcer
if the benefits become short-lived, the costs start to escalate or the
business model undergoes a material change. If you can’t walk
away by virtue of either a “Termination for Cause” or “Termination
for Convenience” clause and survive, then you’re at the
mercy of the vendor.
The
outsourcer has to be contractually committed not to hold your assets
for ransom and also to assist you in the “turnback” to ensure
a minimal disruption of the services.
Thomas
R. Mylott III, in Computer Outsourcing, Managing the Transfer of Information
Systems, outlines both the legal and practical strategies that are necessary.
Especially important for turnback is to establish your right to the
following:
-
Your data on magnetic media and description of the data’s layout
-
Your software
-
The vendor’s cooperation
-
The vendor’s assistance
-
The vendor’s disclosure of technical information necessary or
useful for the transition back
-
A license for the software owned by the outsourcing vendor for which
you will have a continuing need
-
A license for software from a third party, but supplied by the outsourcing
vendor, for which you will have a continuing need
On
the Rocks
Agreements
for systems implementation or software development deals can be a nightmare
when you are forced to end them before completion. The client has typically
spent an enormous amount of time and effort educating the vendor to
build the required system and the vendor has spent an equal amount of
time learning. Neither party will recoup these losses in the event of
a failed project. By the time you get the bad news - late, overbudget,
under-specifications - you’re typically several “M&M’s”
(months and millions) into the build. Did you negotiate the right to
cancel after exhausting the financial penalties? Do they keep the money
you’ve paid them to date?
