Tuesday, June 28, 2005


From: corporate findlaw

In addition to the updating the contractual provisions discussed above, the following core factors are necessary for successful information technology agreements in today's business environments.

Clear Description of Software's Functionality. A customer needs the scope and description of the functionality of the software and services to be clear, complete, and unambiguous.

Meaningful Acceptance Criteria. Acceptance criteria should be objective, rigorous, and tailored to the needs of the customer. It should be possible to fail the test, quantify the failure, and determine what changes are required to pass the retest.

Meaningful Service Levels. A service level is the level of service that the software will provide. Service levels are often expressed in percentage terms. For example, a contract may require a service level of 100 transactions per second 95 percent of the time. A common mistake is to ignore the other 5 percent of the time. The contract should impose a service level on that remaining percentage; otherwise, the exception could provide a large whole for in performance obligations.

Accurate Metrics. Metrics are the standards and other criteria used to measure the performance of the software and related services. Continuing with the example in number three, the metric would be the criteria used to determine whether the software processes 100 transactions 95 percent of the time.

Meaningful Service-Level Credits. These credits are payments, offsets, or other forms of compensation that a vendor is obligated to pay the customer when it the software fails to meet service levels. These payments are what put teeth in service-level obligations.

Maintenance and Support Levels and Response Times. The safest assumption for the customer to make is that software or outsource services will not work completely. To compensate, the customer must receive complete and timely maintenance and support services with proper escalation provisions to be sure that the appropriately skilled vendor employees resolve the problems.

Avoid Too Much Shared Responsibility
. To the extent possible, functions should be the responsibility of either one party or the other. If functions must be shared (for example, first-level support provided by the customer and higher levels of support provided by the vendor), then the demarcation lines should be drawn cleanly. When no one party is responsible, the task often will not get done properly.

Avoid Uncoordinated Amendments. A danger in complex information technology licensing transactions is that, over time, the collection of statements of work, work orders, amendments, and the like introduce inconsistent provisions with the result in extreme cases that it is not clear what the contract requires.

Avoid Paying Too Much Money Upfront. Paying most of the fees at the beginning of the contract reduces the customer's leverage, and in some cases, the key vendor employees will be assigned to other customers.

Termination Rights and Transition Services. A customer will want the right to terminate the agreement both for cause and for convenience. Termination for convenience is an important remedy when the customer downsizes or reduces the scope of the project. A customer will want the right to transition the software or services in house or to another vendor. The vendor will want to be paid for these services. The customer may consider paying a premium for transition services in order to obtain the benefit of an orderly transition.

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