Revisiting contracts limits risk
One of the UK's leading experts in IT law has warned that many firms are contributing to the high rate of IT project failures by failing to renegotiate contracts as projects evolve. And as a result they also face greater legal risks.
Project requirements inevitably change, and there are legal implications if contracts are not adapted to account for those changes, said Richard Stephens, vice-chairman of the legal and contracts group for IT trade group Intellect and chairman of the Society for Computers & Law.
“There is no point leaving your contract gathering dust,” Stephens warned. “[Because if you do and there is a disagreement with your supplier] you end up trying to apply an out-of-date contract to a new commercial situation.”
In legal disputes over IT contracts, suppliers often argue that new requirements have been added, while their customers claim those requirements were implicit in the original contracts.
According to Stephens, firms should reduce the risk of such disagreements by renegotiating their contracts as requirements evolve. And even if a dispute still follows, the existence of an up-to-date contract should make litigation simpler and less costly.
Stephens added that reassessing contracts also reduces the risk of IT project failure. “It does not cure problems, but it does highlight them,” he said. “Hopefully it means you will be able to identify [potential] problems and head them off before they occur.”
Stephens’ calls for improved contract management follow a series of reports that suggest firms are suffering from a high rate of IT project failures. Survey results released last week by IT Week’s publisher, VNU, showed that over a third of IT services projects failed to meet agreed deadlines.
But as more firms outsource IT functions there is growing awareness of the need for flexible contracts, according to Phil Codling of analyst firm Ovum. “Outsourcing requirements change so much we are now seeing shorter, more flexible contracts,” he said. “Firms are aware that without flexibility there is a danger of getting the wrong service at the wrong price.”
n Richard Stephens will be speaking at the Business Performance & Project Management (BPPM) event from 12 to 13 October at the NEC, Birmingham.