The procurement of modern ICT services is a lively sector, characterised not only by challenges present in all types of procurement, but also by its highly distinctive features. When procuring standardised services from established and widely operating suppliers, the customer’s negotiating position can be rather restricted. At the same time, ICT procurement constitutes a significantly business-critical sector for many companies where the customer must ensure certain minimum requirements in selecting the service provider and negotiating the relevant contractual terms.
The last few years have seen a distinct shift towards standardised services, as opposed to a more traditional setting of acquiring individualised ICT solutions that are tailored to the customer’s needs. The modern market offers an abundance of readily available, diversified solutions with unprecedented usability and highly competitive pricing, while also often exhibiting a robust approach to topical data security concerns. While individual procurement has, for these reasons, become ill-suited in many situations, the development towards standardised services has also meant that the contractual framework and allocation of liabilities surrounding the relevant solution are increasingly typically formulated on the service providers’ templates and standard terms. As services must often be purchased on seller-friendly terms, the customer may face a difficult position, especially when the procured service would be integrated into a broader solution to be sold onwards or where there are other special external requirements affecting the customer’s operations (such as when the customer operates a strictly regulated business).
Innovative elements of modern technology solutions, such as artificial intelligence and machine learning, further complicate the landscape, since the contractual framework for such novel features cannot rely solely on traditional licensing terms. Moreover, organisations are subject to constantly evolving compliance and sustainability requirements, which also flow into their ICT procurement processes. Even where the customer finds itself in what seems like a ‘take it or leave it’ situation, the due assessment of the scope of the procurement, alternative solutions and the customer’s liability and risk position remains essential for achieving adequate results and an acceptable contractual position.
In this article, we set out our five top picks for focus areas in selecting an ICT service provider and in negotiating ICT service agreements. These are based on prominent topics, which we continuously encounter when assisting our clients in the field of ICT procurement:
☑️ Whose rights and to what?
The allocation of rights between the vendor and the customer may take up a considerable portion of negotiations when procuring modern ICT services. Which party has the rights to the service infrastructure, the data stored within it, the content produced by the service, or to the systems connected to the service? The customer should be highly mindful of such questions when assessing contractual terms offered by service providers, since the objectives pursued by the ICT procurement may fall short if the rights to the service and the relevant data are not allocated in a manner that supports such objectives or the customer’s future operational requirements.
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