Developing and Implementing Large Scale IT Projects

Transcription

1 Developing and Implementing Large Scale IT Projects for ACC EMEA call on 8 January 2015 Nick Holland Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com

2 genda. Takeaways. Scope of IT Projects Se8ng the Scene. Where Do Large- Scale IT Projects Go Wrong?. Use of RFP to Select IT Service Provider. In- house Counsel Role. Commercial Guidance. Highly NegoSated Contract Clauses. Exit Planning. Conclusions Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 2

3 . Takeaways After Today s Presentation n understanding of:. The breadth and scope of large- scale IT projects and some of the related challenges. In- house counsel s role in the selecson, negosason and implementason of IT project. The most highly negosated concerning commercial concepts and contract clauses Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 3

4 . Scope of IT Projects e#ng The Scene What are different types of IT projects? Who will develop and implement the IT project? Why do companies o^en use third parses to implement or outsource IT projects? Why are large scale IT projects so challenging for in- house legal departments? Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 4

5 . Where Do Large- Scale IT Projects Go Wrong? Robust joint cross industry study of 5,400 complex IT projects Results published in 2012 McKinsey/University of Oxford arscle enstled Delivering large scale IT Projects on Sme, on budget, and on value Findings: Large- scale IT projects run 45 percent over budget and 7 percent over Sme while delivering 56 percent less value than predicted. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 5

6 . Where Do Large- Scale IT Projects Go Wrong? ccording to the study published by McKinsey and the University of Oxford, four groups o ssues cause most IT project failures: 1. Missing focus - unclear objecsves - lack of business focus 3. Content issues - shi^ing requirements - technical complexity 2. Skills issues - unaligned team - lack of skills 4. ExecuSon issues - unrealissc schedule - reacsve planning Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 6

7 . Use of RFP to Select IT Service Provider FP v. Single Source FP CompeSSve process Balance of bargaining power is in customer s favor Customer leverage can be maintained unsl contract award Allows customer to assess the market and alternasve solusons But RPF process can be perceived as lengthy and costly. ingle source Award contract to single vendor without compessve process Vendor likely to have an exissng, ongoing and strong relasonship with the customer Risks: absence of compesson may impact price, commercial terms, innovason etc. Can be perceived as faster, and less costly than compessve process and allowing customer and vendor to foster long- term strategic relasonship Risk misgason/safeguards? Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 7

8 . Use of RFP to Select IT Service Provider nclusion of the Contract in the RFP? dvantages: Allows apples to apples comparison of vendors Early understanding of vendor s posison on contract terms Result in shortened negosason phase Ensure that negosasons are focused on key issues isadvantages: Appropriate contract must be at hand prior to RFP process Certain vendors accept terms as is without financial back- up Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 8

9 . In- House Counsel Role our Role in RFP Process Early involvement Keeping business stakeholders informed Prepare contract Manage Legal secsons of the RFP End- to- end review of the RFP Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 9

10 . Commercial Guidance ocus of Key Contractual NegoCaCons: Scope Change Control Commercial structures Performance IncenSves Governance Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 10

11 . Commercial Guidance cope of the Project cope - the descripson of the work being undertaken and the proposed Smescale to omplete such work. iagram below reflects a project delivery methodology Plan Analyze Design Build Test Deploy Test Operational Readiness Test Functional Requirements Technical Verify Product Test User Acceptance Test Application Integration Performance Test Design Assembly Test Detailed Design & Build Component Test Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 11

12 . Commercial Guidance cope of the Project ommon Scope Problems: OpSmisSc assumpson Complexity or consngency factors were missed Failure to use standardized essmasng models and methodology Reliance placed upon RFP requirements and informason without validasng with due diligence Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 12

13 . Commercial Guidance hange Control hange Control - a formal process to ensure that all service or financial changes are pproved and signed off by the parses before implemensng the change Abuse of change control by service provider? Client changes or delays will impact scope, schedule and delivery costs? Failure by parses to follow change control process Consistent applicason of change control process is key to enabling informed client project decisions and avoids unintended scope creep Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 13

14 . Commercial Guidance ommercial Structures ime and Materials (T&M) - service provider invoices the client based on our delivery eam s Sme performing the services and a rate per hour or day. ixed Fee - fixed fee is a stated contractual price and the price is not subject to djustment other than where specifically so agreed under change control. ilestone - Based Pricing pricing arrangement where the service provider will earn fees ased on achieving certain project milestones as defined in the agreement. ransaccon - Based Pricing - transacson volumes for the system or business process eveloped, implemented, or operated determine the service provider s fee. alue- Based/Benefits - Based Pricing - consngent pricing arrangement where the value ealized by the client as a result of the services at least in porson determines the service rovider fees. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 14

15 . Commercial Guidance erformance IncenCves old Back Client retains and holds back a percentage of the total contract price unsl a re- determined period of Sme or event following final sign- off. iquidated Damages (LDs) contract provision se8ng out a pre- determined amount (or a re- determined formula for calculasng the amount) payable in the event of a breach. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 15

16 . Commercial Guidance overnance overnance - a formal process for Smely and successful idensficason and resoluson of perasonal and commercial risks and issues. Deal with issues efficiently, amicably and fairly EffecSve governance structure Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 16

17 . Highly Negotiated Contract Clauses imitacon of Liability (LOL) contract provisions placing a limitason (i.e., cap) on each arty s liability exposure associated with performance or receipt of services under the ontract. Client Shi^ delivery risk and liability as its service provider Seek unlimited liability or very high limit of liability Create significant leverage Service Provider Reasonable correlason between risk and reward Limit responsibility for those damages directly caused by service provider s failed services Object to taking on consequensal damages Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 17

18 . Highly Negotiated Contract Clauses imitacon of Liability: Common Final PosiCons 12 months of trailing charges (outsourced services) An amount equal to the total fees (IT project) Recoverable losses capped per calendar year Cap per claim/occurrence Separate caps for different types of loss/damage Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 18

19 . Highly Negotiated Contract Clauses ndemnificacon - a voluntary promise in a contract to compensate another party against osses suffered as a result of a third party claim. Client Obligate service provider to compensate client for losses from anscipated situasons, including breach of contract or third party damages Service Provider Provide indemnity against liabilises from third party claims to the extent service provider can control the risk and liability May equate indemnity to insurance Avoid indemnity for general situasons (e.g., breach of contract or any third party damages) Seek alternasve recovery right in addison to breach of contract Avoid responsibility of an insurance underwriter Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 19

20 . Highly Negotiated Contract Clauses ndemnificacon: Common Final PosiCons Unlimited indemnises for personal injury, death and tangible property caused by negligence, taxes, employment claims and IP Infringement Scope of IP indemnity o^en contensous IP Indemnity if IP is assigned to the Customer AlternaSve: apply a separate higher cap to specific indemnity claims. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 20

21 . Highly Negotiated Contract Clauses cceptance - process where client will review, inspect or test the deliverables Accenture evelops and, as a result, accept or reject such deliverables. Client Longer acceptance period to review and test deliverables No deemed acceptance Concerned about missing a problem during review and/or tessng process Service Provider Shorter acceptance periods to keep project on Smeline Acceptance by client provides certainty Avoid project delays Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 21

22 . Highly Negotiated Contract Clauses cceptance: Common Final PosiCons For interim deliverables, generally shorter acceptance periods considering the projec Smeline For final soluson, longer acceptance period enabling compleson of final review and user acceptance tessng Typically, soluson is deemed accepted if client decides to deploy the soluson into producson prior to complesng acceptance tessng and defects are corrected in warranty period Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 22

23 . Highly Negotiated Contract Clauses P Ownership describe who owns the rights to the work products or deliverables eveloped on a given project or engagement. Client Safest to own all IP rights Service Provider Provide to client broad enterprise- wide rights to use in its business Should own the deliverables because it paid for them Exclusive ownership by one client is potensal restricson on its business or pracsce Tools and pre- exissng IP must be unrestricted Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 23

24 . Highly Negotiated Contract Clauses P Ownership: Common Final PosiCons Each party retains ownership to its pre- exissng IP and any enhancements or modificasons to it In tradisonal projects or outsourcing, client owns the net new deliverables In new technology advancements (e.g., digital offerings), service provider is retaining ownership to the IP Customer ownership of newly created IP may come at a premium. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 24

25 . Highly Negotiated Contract Clauses ompliance with Laws describe each party s responsibility with respect to any pplicable laws, regulasons and rules, and the process for making changes to the contrac f there is a change in law that impacts the project or engagement. Client Service provider should be compliant with all laws when performing the service Service provider will change its service if change in law impacts that service Service Provider It will be compliant with laws applicable to its business but client is responsible for laws applicable to its business It will change its services to accommodate changes in laws to its IT services but parses will agree on change control for changes in client laws Client will give direcson to it on how client complies with laws applicable to client s business Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 25

26 . Highly Negotiated Contract Clauses ompliance with Laws: Common Final PosiCons For IT projects, each party is responsible for the laws that are applicable to its respecsve business Service provider will follow direcson or guidance from client on laws applicable to client s lines of business ApporSonment of costs arising as a result of changes in law is o^en contensous. Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 26

27 . Highly Negotiated Contract Clauses ata ProtecCon describe each party s responsibilises with respect to protecson of the ther party s personal data. Client Service providers using personal data should be responsible for breaches or unauthorized access incidents Service provider may have bener processes and protecsons than the client itself Service Provider ParSes should agree on protecsve standards and client should provide direcson for applicable data privacy laws Liability for confidensality of business informason is different than liability for personal data Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 27

28 . Highly Negotiated Contract Clauses ata ProtecCon: Common Final PosiCons Final posisons vary greatly Many US service providers demand caps on liability Clients and service providers agree that certain damages are considered direct damages Europe: EU wide privacy framework Reach of EU privacy law depends on the "data controller's" place of establishment or locason of processing equipment EU - country of origin principle Control of transfers of personal data to outside of the EU Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 28

29 . Exit Planning ssues to Consider: obust exit plan and obligasons on the incumbent IdenSficaSon and treatment of assets Handover of informason on service specificason/service management Knowledge transfer Assistance during the transison period ConSnued provision of the current service TransiSon Costs TUPE ue diligence by incoming vendor Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 29

30 onclusions CriScal for in- house counsel to understand the business aspects of IT project Quickly determine whether to keep in house or use external counsel Don t forget to consider global legal impact Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 30

31 ontact Nick Holland Partner - London Fieldfisher E: nick.holland@fieldfisher.com T: +44 (0) M: +44 (0) Brussels / Düsseldorf / Hamburg / London / Manchester / Munich / Palo Alto / Paris / Shanghai / =ield=isher.com 31