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Avoiding IT Litigation with Great IT & Software Development Contracts
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Avoiding IT Litigation with Great IT & Software Development Contracts

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Outlines a "Systems Approach to IT Contracting" that, based on their own personal experiences and expertise, better serves many IT contract purposes. This approach quite thoroughly flushes out and …

Outlines a "Systems Approach to IT Contracting" that, based on their own personal experiences and expertise, better serves many IT contract purposes. This approach quite thoroughly flushes out and documents the responsibilities and risks each party is willing (and able) to accept and the deliverables / deliverable quality each party will produce and approve, how to get a project back on track, and the renedies for failure to deliver.

Done properly with dedicated IT Contracting Teams, this approach to IT Contracting will generally produce:

(a) much better contracts,

(b) stronger long term working relationships between the parties that can be very helpful if and when a disputes arise, and,

(c) more understanding and control over planning, developing, and managing IT systems and project: estimates; schedules; staffing; progress awareness and reporting; functional AND performance requirements (scope creep); better testing regiments; quality assurance; project specific risks and stakeholder expectations.

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  • 1. IT Litigation & the ‘Bad’ Contracts That Foster Failure… & What YOU Can Do About It! IT Litigation & Contracting for Lawyers MCLE 3.5 hour presentation Part I. Why Systems Fail? Part II. The IT Contract & the Systems Life Cycle Part III. IT Related Contract Clauses Part IV. More Contract Clauses: IT and General By Steve Brower, Esquire Warren S. Reid, Managing Director Buchalter Nemer PLC, Shareholder WSR Consulting Group, LLC E-mail: sbrower@buchalter.com Management, Technology, e-Business & Litigation Consulting Website: www.buchalter.com E-mail: wsreid@wsrcg.com Office: 714/549-5150 Website: www.wsrcg.com Office: 818/986-8842 © 2006-2009 by Warren S. Reid All Rights Reserved 1
  • 2. Steven Brower , Esquire Litigation shareholder with Buchalter Nemer (sbrower@buchalter.com) in Orange County, California 30 years of litigation experience emphasizing Insurance Coverage, Technology Litigation and Intellectual Property, but also covering fraud, contracts, real estate, libel, homeowner's associations, malicious prosecution Trials, mediations, arbitrations in more than 10 states Recent appeal, credited as the first in the United States, where the Court of Appeal ordered a default, on fraud, in favor of his client Credited as the first attorney in the US to get a civil injunction under 18 USC 1030 (Computer Fraud & Abuse Act) First published use of the term "software malpractice" Presented formal paper to the Association of Computer Machinery on Computer Contracting in 1982 Mainframe computer programmer for 10 years in Cobol, APL, RPG II - one of the first public users of the Internet, with access since 1973 2s 2m
  • 3. Warren S. Reid 16 years as IT consultant Partner Designed/implemented/contracted myriad systems 1988, founded: WSR Consulting Group, LLC Consultants/Experts in Computers & Software Projects have included: Testifying expert/expert witness in matters re: Helping launch FEO for Pres. Carter in 75 days The root causes of system failure ERP project/sw: development; implementation; Oversaw acceptance of CA’s Lotto in 100 days estimating; scheduling; resourcing; project mgt Helped resurrect MESDAQ: day 1 failure. Systems Development Life Cycle (SDLC) issues Extensive industry experience including: Systems/software testing & acceptance Retail industry, grocery, fast food IT contract intention, meaning & interpretation SW QA evaluation & fitness/usability purpose POS systems of all kinds Software requirements elicitation & control E-business and e-commerce systems Valuing IT assets, systems and companies Health care, hospital and HIPAA systems Testify: State/Fed Courts; Court of Fed Claims Robotics and smart buildings, and more Expert Witness for “Who’s Who” of MS & MBA: Wharton Grad School Finance international business incl: Developed seminal “IT Success Models” U.S. Dept of Justice & Pres. William Clinton Part of 3 USC graduate school programs An Asian Stock Exchange; Pepsico; Her Royal Majesty, the Queen of England; 2 law school programs in IT Contracting Compuserve; Fortune 500 retailers; Many peer-reviewed articles/book co-author Big -8 Consulting Firms ERP software developers Many more. 3w 2m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 4. Standish Group: Chaos Study Results 2004+ CHAOS Summary 2009: + success = 34% (delivered on time, budget, on target) + challenged = 44% (late, over budget, < required F&F) + failed = 24% (cancelled before complete; delivered & never used) “… numbers represent downtick in success rates from previous study, and significant increase in number of failures … low point in last five study periods & highest failure rates on over a decade. 4w 3m
  • 5. Standish Group: Chaos Study Results 2004+ http://www.infoq.com/articles/Interview- Johnson-Standish- CHAOS;jsessionid=EC1E99A30C95AED4B93 60D061F8E1980 2m 5w
  • 6. What is the Purpose of “Contract”?? TO ALLOCATE RISKS 6s 3m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 7. CONTRACTS ALLOCATE RISKS http://www.wsrcg.com/SoftwareFailXpert.php 7w 4m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 8. It’s the Same in Virtually Every Litigation … All Over the World! “He Said … She Said” System doesn’t work Customer changed mind We can’t use it Client people not trained System failed in field Client did not do BPR Fundamental flaws Only “two more months” They s/have told us They wouldn’t listen System is full of bugs Bad data/conversion Limited functionality Customer kept change scope Developer failed @ SIPM Customer failed @ SIPM Poor advice Poor cust decision-making Unqualified personnel Wrong client people Wrong devel process Poor client support Oftentimes, BOTH sides are right & contribute to failure – but at different %s SMART: Specific, Measurable, Attainable, Relevant, Trackable 16m © 2006-2009 by Warren S. Reid All Rights Reserved 8w
  • 9. Customer Requirements: … Still Critical! Standish Group – 1995: “18% of all sw projects fail due to unclear objectives & incomplete reqmts & specs” Would you think it is more, or less, today? 9s 3m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 10. Why Are Requirements So Hard… Still? 10 w 5m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 11. Three Sources F&F*; (B&D**); specified or implied “-abilities”; Sys Design & UI: DD DI DN DNA Current and future Business Case Biz processes; Biz rules; Rules engine Operations parms; Doc map Accept Criteria; RTM; Gaps/Changes; Rollout Target maint Defect metrics QA More * Features & Functions © 2006-2009 by Warren S. Reid All Rights Reserved ** B&D: Breadth & Depth 11 w 4m
  • 12. What is it? $, Schedule, Requirements, QA? Some MTBF? First to Market? Lowest Total Cost of Ownership? Get next round of financing? Meet biz Case, ROI, growth w less staffing? Better customer service? Is it being done? Correctly? Vague, not measurable, afraid to commit (limit) Not used as benchmark for requirements “chill” Acceptance Criteria (Post GL maintenance and enhancements) [Did you check References?] © 2006-2009 by Warren S. Reid All Rights Reserved 12 w 5m
  • 13. Scale Factors Precedentedness Development Flexibility Architecture/Risk resolution Team Cohesion Process Maturity Cost Drivers Personnel Analyst Capability (ACAP) Analyst Experience (AEXP) Programmer Capability Platform Experience (PEXP) Language and Tool Experience (LTEX) Personnel Continuity (PCON) Project Use of Software Tools (TOOL) Multisite Development (SITE) Development Schedule (SCED) Platform Time Constraints (TIME) Main Storage Constraints (STOR) Platform Volitility (PVOL) Product Required reliability (RELY) Database Size (DATA) Product Complexity (CPLX) Required Reusibility (RUSE) Documentation match to lifecycle needs (DOCU) 8m © 2006-2009 by Warren S. Reid All Rights Reserved 13 w
  • 14. Risks Known BEFORE Project Starts! People/Resource Risks Project & Tech Mgmt Risks Turnover, culture, x-comm. Client, Depts, Users, IT, Vend, O/S consults, Top Mgt Commit; Proj Champ attys, custs, analyst, mkt “expectations” Partner; Ref. Checks/Ref’s Refs Unclear Leadership – SIPM Requirements Risks Process Risks Poor Project Charter Project under- or mis-estimated Defined, Baselined, Implied SEI-CMMi level; ETC &EVM Stds Stability, Complexity Sched, $$, estimates, change control Incomplete, Misunderstood, Gallop Not enough time for testing I’faces, Data Conversion Shortcuts to SDLC on the fly Technology Product & Other Risks HW, SW, Net, D/B, Internet, Mobile Performance, testedness & readiness Security; Privacy -abilities (scale, use, test, port, maint) C – Correctness Competent T/O proc, supt, maint? I – Integrity A – Available compet; economy; org; regulatory Tool avail? mature? train? use? If you know beforehand… Plan, Contract for, Mitigate, Monitor, Manage Them! © 2006-2009 Warren S. Reid All Rights Reserved 2006- This model will change and be updated over time 14 s 10 m
  • 15. What Can Possibly Be Misunderstood?! … Everything! People are different People have different: Objectives, perspective Cultural bias, exp/educ/expertise Styles of understanding/communicat’g Abilities, talents, logic, creativity Understanding of priorities Fears: spoken and unspoken Understanding of what is subjective v objective Implied/understood unspoken (needs, reqts, sizzle) So, what won’t be misunderstood? © 2006-2008 Warren S. Reid All Rights Reserved 2006- This model will change and be updated over time 15 s 4m
  • 16. “We THOUGHT … Contract SAYS” ©2006-2009 by Warren S. Reid All Rights Reserved # Category What was Understood: What the Contract Says: 1. Suitable System description Bounds scope; Uber-theme 2. What works? Functional requirements … as per specs dated _____ 3. How well? Performance reqmts Scal- Port- Avail- Maint- Use- SMART 4. Who Does what? Roles & responsibilities RM? Dispute escal/resol? HR reqts? 5. How We Do It? Conduct of project WBS, estim, staff, delivs, PM, SDLC, bugs 6. Just for ME Custom programming services Config, SDLC, PM, est, test, I’face, maint 7. U prove 1st Sys integ/interface/Test/Convert Results NOT Resources; “Success” defin 8. Min Reqmts Accept Testing Process Who? How? When? Where? Criteria? 9. More Min Reqts Key Deliverables: QA; Train; Doc; Exist? Imply v spec? Depth? UI (DD, DI, It Works! DN, DNA) Maintainable? Signoff Procs 10. & Tomorrow? Maint, upgrades, fixes T/Over stds? Work stds? LTCO? SLA? 11. $$ = Mouth? Proposals, workproduct, promises “Parole evidence” rule; 4 corners only 12. Go-Live ALL Systems Go! What’s acceptable? Checklist? Vote? 13. Other Costs/Pymts; ADR; TERMinate; Renew; There’s more to THE Sys than A sys (SOS): Title; X-hire; Site prep; Install hw, sw, $$ limits; penalties; ownership; holdbacks; nw, BPR; confid;$ protect; Liab remedies; liability limits; privacy; hot sites limits & exclusions 12 m 16 s
  • 17. Why Are Contracts (K) So Important? & Why Must YOU Know About Them? Caveat: “Standard K form” favors V/large Ks; used as sub for good mgt/K activ Caveat: K language often incomplete & ambig; drafters gone; shelf death Clear & explicit delineation of Party rights, obligations & expectations Requires ID, negotiation, appreciation others’ views, beliefs & objectives BEFORE deal Generally produces much better : working relationship during sane & emergency/surprise moments prospect of proj success ($, Sch, F&F, QA, SH, Risk; <costs, staff, inv; > C serv, mkt share) Must be a living document – able/willing to adapt to changes Best K team knows: risks alloc, finan. resp, strong sense of VALUE, law skill So, Best Team has: CXO, CFO, biz domain & tech eng/consult, lawyer Matters of: Fact, Law, Evidence, Risk, Technology © 2006-2008 Warren S. Reid All Rights Reserved 2006- This model will change and be updated over time 17 s 4m
  • 18. Introducing: The IT Contracts Model Allocate Risks; Keep On Target; Helps Lead to Project Succes © Copyright 1998 – 2008 By Warren S. Reid and Richard L. Bernacchi, Esq. All rights reserved The IT Contracts Model ties together seminal work of: Richard (Dick) Bernacchi, Esq., Partner Emeritus from Irell & Manella, LLP A founder of the Computer Law field, and Warren S. Reid, CMC, CFE, CSQE, CSTE IT expert w 40 years experience in IT contracts, litigation & expert witness areas. Model ties key tasks, decisions, deliverables & quality aspects of Systems Development Life Cycle with related, key IT contract clauses. The IT Contracts Model was created to enable vendors, integrators, PMs, executives & SMEs to better understand where/how they fit into the IT contracting process & to allow them to make informed & measurable contributions to IT Contract Team. *SDLC: Systems Development Life Cycle © 2006-2009 by Warren S. Reid All Rights Reserved 18 w 3m
  • 19. The Systems Development Life Cycle: SDLC All good methodologies are the same!” WSReid 19 w 4m
  • 20. The Systems Development Life Cycle: SDLC Basics Set Stage Personnel Recitals Systems Description Maintenance General Provisions Warranties Parties To The Contract Ownership & Protection General Reps & Warranties Title Definition Of Terms License Rights Assignment Of Delegation Proprietary Rights Indemnity Interpretation Of Agreement Confidentiality & Security Functional Rqmts/Performance Measure Risks & Rights Project Management Risk Of Loss/Damage Project Timetable Insurance Project Management & Reporting Price Protection Project Costs & Schedule Payment Renewal Options Purchase Options Pre-Go Live Items Trade-In Rights Site Preparation System Configuration & Installation Termination & ADR Training Term & Termination Documentation Limits & Exclusions Of Liability Low Level, System & Integration Taxes Acceptance Testing Miscellaneous Protections Dispute Resolution Mechanisms Customize & Convert Custom Programming Requirements Special Outsourcing Considerations Conversion & Support Services 20 w 2m
  • 21. The Systems Development Life Cycle (SDLC) & Its Relationship to the “Successful” IT Contract e IT Sid Basics r Ex Ma Set Stage e pe nag wy rt Sideme La Recitals General Provisions e nt, Parties To The Contract General Reps & Warranties Definition Of Terms Systems Description Assignment Of Delegation Functional Reqmts & Perform Measure Interpretation Of Agreement Project Management Ownership & Protection Project Timetable Title Project Management & Reporting License Rights Project Costs & Schedule Payment Proprietary Rights Indemnity Pre-Go Live Items Confidentiality & Security Site Preparation Risks & Rights System Configuration & Installation Risk Of Loss/Damage Training Insurance Documentation Price Protection Low Level, System & Integration Renewal Options Acceptance Testing Purchase Options Customize & Convert Trade-In Rights Custom Programming Requirements Termination & ADR Conversion & Support Services Term & Termination Personnel Limits & Exclusions Of Liability Maintenance Taxes Miscellaneous Protections Warranties Dispute Resolution Mechanisms Special Outsourcing Considerations 21 w 2m
  • 22. Model III. The IT Contracts Model for Successful Contracts (Top Level) 2m © 2006-2009 by Warren S. Reid All Rights Reserved 22 w
  • 23. The IT Contracts Model for Successful Contracts (Broken down – Lawyer side) o S ide e r wy o La o o o o o o o o . o . o . o 1m © 2006-2009 by Warren S. Reid All Rights Reserved 23 w
  • 24. The IT Contracts Model for Successful Contracts (Broken down – IT side) O IT . . O Ex Man . . pe ag O rt e Sid men . O e t, O O O O O O O 1m © 2006-2009 by Warren S. Reid All Rights Reserved 24 w
  • 25. Model III. The IT Contracts Model for Successful Contracts (Detailed) http://www.wsrcg.com/PDFs/model_itcontracting.pdf 28. TERM & TERMINATION (K) 11. GENERAL PROVISIONS (L) 22. RISK OF LOSS/DAMAGE (J) 28.1 Initial term of K(K) 28.2 Renew at Term(s) 28.3 Def of breach by V 28.4 Def of breach by B I. Parties to 'Contract' (L) Savvy MIS/IT Contracts that: Allocate Risks, Keep You on Target, Help Lead to Success 22.1 During shipment 28.4 Definition of breach by B i.1 Correct legal names i.2 Principal places of biz © Copyright 1998-2008 By Warren S. Reid & Richard L. Bernacchi, Esq. All rights reserved 28.5 Notice of breaches & cure provisions i.3 Legal Relat’shp to other entities involved in tranx 22.2 After shipment 28.6 Termination by V for breach by B i.4 State or jurisdiction of incorporat'n/formation. 22.3 Cross-reference to insurance provisions ABBREVIATIONS: 28.7 Termination by B for breach by V i.5 Authority of signatories An ORAL contract isn't worth the paper its 1. RECITALS (A) 3. FUNCT RQMTS & PERFORMANCE MEASURES (B) K = Contract Pty = Party (to a contract) 23. INSURANCE (J) 28.8 Termination by V or B for insolvency/BK 23.1 V’s obligations to provide insurance II. General Reps & Warranties (L) written on! 1.1 V’s areas of expertise, experience, etc. 3.1 Desc of biz funct to be performed (or x-ref to RFP) V = Vendor; B = Buyer BU = Backup 28.9 Obligs of V & B to assure smooth transition ii.1 Legal status of entity ii.2 Auth to enter into K 0. BASICS (M) 1.2 B’s business & data processing rqmts 3.2 Rqmts Elicitation (RE)/Scope Change (s) Process SDLC = System Development Life Cycle 23.2 B’s obligations to provide insurance 28.10 Survival of certain provisions 23.3 Types & scope of coverage ii.3 No conflicting agreements 0.1 No such thing as a PERFECT contract (K) 1.3 V’s ability or experience to handle B’s rqmts - ID specif Users/Classes; assure/sched availability sw = softw are; hw = hardw are; nw = netw are 23.4 Acceptable underw riters 29. LIMITS & EXCLUSIONS OF LIABILITY (K) ii.4 No legal impediments ii.5 No brokers/agents 0.2 The PROCESS is key, NOT just the contract 1.4 Spec/execut'n of a quality RFP process; req V services - Prep timeline; ID RE technq/tools/docs used/produced proc = process; proj = project LT = Long Term 23.5 responsibility for payment of premiums 29.1 Express/ implied w arr disclaim not inc in K 0.3 K is a LIVING doc; w illing to adapt to change 1.5 B’s issuance of Request For Proposals (RFP) - Escalation/dispute resolution process PM = Project Manager recs = recom mendations 29.2 Exclusion of consequential damages III. Definition of Terms (L) 23.6 responsibility for processing claims 0.4 K lang often ambig/incomplete; Drafters gone 1.6 V’s Response to B’s RFP; feasibil, honest, suitabl - Scope s process: proposed, est all impacts, relat'shp = relationship proc = process(es) 23.7 Relat’shp to Limits of liability 29.3 Limits on V’s liabilities 29.4 Limits on B’s liabs IV. Assignment or Delegation (L) 1.7 Addtl docs or communications betw een B & V decis crit, doc, update ests, CPM, staff, monitor s = delta = change Desc = description 0.5 Clear/explicit delineat'n V/B rights, obligs, expects 29.5 Xcept'ns to disclaimers, exclusions/Limits iv.1 Restrictions on assignment &/or delegation 1.8 Proposal eval factors & assumpts affecting B’s decis'ns - Embrace change: Iterative, Incremental, interactive RFP = Request For Proposal ID= identify 0.6 Req. ID, negot, apprec others' view s, objs B4 deal 24. PRICE PROTECTION (J) 30. TAXES (K) iv.2 Exception for affiliated entities 1.9 Biz Case Discussion (?) 3.3 Incorp of Functional Requirem ents Docs rqm t = requirement; RE = Rqmts Elicitation (proc) 0.7 Generally produces much better: 24.1 Limits on future price or fee increases 30.1 Responsib for sales/use & prop taxes, etc. iv.3 Exception for business reorganizations - Rqts incl: success crit; '-abilities'; F&F current/future; a. work'g relat during emergency/surprise periods 2. DESC OF SYSTEM (A) 5. PROJECT MANAGEMENT (PM) & REPORTING (C) 24.2 Disc'ts on future procurem'ts & period of Avail 30.2 Right to contest & indemnity iv.4 Except'n for sale or transfer of substant all biz UI; rpts; biz procs & rules; ops parms; doc m RTM; ap; 24.3 Most favored cust treatment & period of Avail b. prospect of project success: 2.1 Desc/specs for equip, compo'nts, media, cable, etc. 5.1 Steering Comm role, structure, makeup, processes 30.3 responsibility for filing returns iv.5 Consents not unreasonably w ithheld GAPs/ss; rollout plan; test results; sys.stability; Go- 24.4 Guaranteed prices & period of Avail i. $, Sch, F&F, QA, SH, Risk 2.2 Configuration w arranty 5.2 SWAT Team role, structure, makeup, processes 30.4 responsibility for interest & penalties Live checklist; rqts s process/tools; defer/tradeoff; 24.5 Relat’shp to trade-in provisions V. Interpretation of Agreement (L) ii. < costs, staff, inv; > C serv, mkt share 2.3 Desc & specs for sys sw; current; complete; usable 5.3 Named Sys Integrator's role, resp, auth, accountability 30.5 Investment tax credit representations training plan; converted data; legacy I'face; security v.1 Entire agreement v.2 Governing law 0.8 Best K Team know s: alloc risk; $ resp; law ; value 2.4 Desc & specs for packaged apps sw 5.4 Desc of V’s project team; Desc of B’s proj team 30.6 Remedies for breach invest tax credit reps passw ords; enabled Ops/ Maint. Groups, etc 25. RENEWAL OPTIONS (J) v.3 Venue of litigation or arbitration 0.9 Best Team:CXO; CFO; Law yer; SME/eng xperts 2.5 Desc & specs for custom mods to packaged apps 3.4 Incorp of V’s proposal(s), w ebsite, marketing matl, etc. 5.5 Designation of V’s PM; Designation of B’s PM 25.1 Renew al of hw maintenance support 31. MISCELLANEOUS PROVISIONS (K) v.4 Consent to in personam jurisdiction of courts 2.6 Desc & specs for custom sw apps to be devel by V 5.6 Determ SDLC METHOD to be used; rules to deviate 31.1 Avail of spare parts 3.5 Performance Parameters: 25.2 Renew al of sw maint &/or enhancem't support v.5 Situat'n making liquidated damages reasonable 2.7 List & Desc of all manuals, system & user docs, etc. 5.7 PM Tools/Measures: EVM; CPM; ETC; $/sch variances a. Relationship to functional processing rqmts. 25.3 Lease renew al(s) 31.2 Specs for & Avail of supplies v.6 Joint participation in drafting of K Contracts are M 2.8 Incorp of RFP, proposals, brochures, mktg matls, etc. b. Types & volumes of data to be stored 5.8 V’s resp for PM; proj rpt'g: format; freq; distrib; detail 25.4 Calc of charges or fees w /i renew al period(s) 31.3 Covenant not to solicit employees v.7 Partial invalidity; severability NEVER Perfect 2.9 Sys Def (5 Rs: Right person; truck; tools; address; time) 5.9 V’s/B's resp: BPR/new proc dev, link, train, test, approv 31.4 Performance bonds v.8 Rem edies not exclusiv e L 2.10 Definitions of other terms & Relationship to system c. Number of users; Locations 5.10 V’s resp to ID, manage, mitigate RISKS, probs, delays 26. PURCHASE OPTIONS (J) 31.5 Applicability of UCC d. Special features or capabilities v.9 Num ber & gender v.10 Waivers CONTRACTING: 2.11 Testing: proc; types; rqm tools; staff; doc; S/O; crit t; 5.11 B’s responsibity to address V's probs/recs in proj rpts 26.1 Guaranteed prices & period of Avail 31.6 Rules re publicity 31.7 Quiet enjoyment e. Hosting, SaaS, other service act w trial period GENERAL STRATEGY 2.12 X-refs to other K provisions & exhibits (inc Biz Case) g. Use by affiliates 5.12 B’s responsibility to assist V 26.2 Credits for rent or lease payments 32. DISPUTE RESOLUTION MECHANISMS (K) PROVISIONS & TEAM Contracts 5.13 B’s responsibility for project problems or delays h. Transfers to other CPUs or locations 26.3 26.4 Method of exercising option Assignability of options 32.1 Mediation by designated party reps Balance liabil limits w 11. General Provisions: Contract Oxymorons ALLOCATE A i. Right to make copies, incl bkup or archiv copies 5.14 Relationship to project timetable 32.2 Arbitration essential purpose of Risks 5.15 Remedies for loss/reassignment of V’s Proj Mgr (PM) - Parties - Gen'l Reps/Warranties - Clearly misunderst'd - Act Naturally SET STAGE NUTS: Not Using j. Grow th cap meas'ed in increas tranx process rate 26.5 Relat’shp to accept (AT), w arranty, maint provis a. Types of disputes & method of initiating remedies - Definitions - Assignm ent - - Same difference - Exact estimate 1. Recitals The Standards k. Capacity for field modif ication or enhancement 12 . PROJECT COSTS & PAYMENT SCHED. (C) b. Location; c. # of arbitrators ("arbs") Interpret'n 27. TRADE-IN RIGHTS (J) U-CRINGE: Unplanned Chang'g - Good grief - Test organization 2. System Desc l. Other V representations 12.1 Hw prices , if purchased (incl “bundled” sw ) d. Qualificat'ns of arb(s) e. Arb selection The 3.6 Perform ance "-ABILITIE S" 27.1 Right to upgrade to new avail hw /sw ; avail per'd Rqmts IN-validate Good 12.2 Sw prices , if purchased (& if 2b stated sep f. Compensation of arbitrators Economics/Engineering BARGAIN? SW QA: ['-abilities'] hw , sw, nw , architecture 12.3 Rental or lease pymts & method of calc 27.2 Right to upgrade to curr avail hw /sw & avail per g. Arbitration rules & procedures The “HE SAID… SHE SAID…” Chart – for Failed Software Projects USERS (Extl): Avail- Depend- Flex- Integ- 12.4 License fees for softw ar e and applications 27.3 Calculation of trade-in credits h. Provisional remedies 27.4 Relat’shp to compatibility representations i. Discovery rules j. Rules of Evidence K K Area Category: What Users, Acquirers, What Vendors, Software Developers, B Oper- Reli- Modif- Use- Scala Safety Secur- Surviv- R&R- Config- Utility; $ Effect [vs benchm 'ks] 12.5 Training fees; Refresher train'g devel & fees 27.5 Relat’shp to guaranteed or future discounts SDLC Step 12.6 Maintenance fees for equipment and/or sw k. Funding of arbitration costs X-Ref “-abilities” In-house IT Dept Teams Say: Sys Integrators Say: DEVELS (Internal): Adapt- Audit- Deploy- Reuse- T 27.6 Relat’shp to perform meas, AT, w arr, maint provis 12.7 Fees/$ for addl serv ices (hos ting; SaaS; BU) 1. Reimbursement of costs & fees TERMINATION 3. Funct Rqm ts & Interop- Maint- Perform- Port- Extense- Struct- Biz Case/Reqts System doesn’t work; Not You changed y our minds; You don’t Perform Measures Manufact- Trace- Reuse- TEST- Struct- 12.8 Partial pay ments tied to major miles tones m. Governing law n. Briefs & ADR 2, 3 Feasibility 12.9 Start date for rental or lease payments o. Findings & conclusions Feasibility what we wanted know what you want/need; Not viable 3.7 Relationship to acceptance criteria & testing 12.10 Commenc ement date for license fees q. Rendering & enforcement of aw ard 28. Term /Term inat'n 3.8 Relationship to ongoing m aintenance reqmts 29. Lim its/Excl to Liab Reqts Elicit/ You delivered limited 12.11 Commenc ement date for maintenance f ees 32.3 Use of sys pending resolution of disputes 3, 8 Capability You continually changed project scope 30. Taxes 31. Misc Scope Mgmt functionality/performance Cost 12.12 Credits or offs ets f or delays or failures 32. Dispute Res Meth 4. PROJECT TIMETABLE (C) 12.13 Refunds if Contract is terminated 18. TITLE (I) If you go to court, 3, 14, BPR/ Compatibility The system failed in the field S You didn’t perform required ‘business C Contracts are 4.1 Definition of proj tasks 12.14 Most favored nation clause 18.1 V’s reps as to ow ner/rights to transf hw /sw you've already 15 Accept Test Computer in p roduction Reid's & process reengineer’ to make it work an SDLC STEP 4.2 Definition of deliverables for each task 12.15 No mods/addtl char ges w /o w ritten approval 18.2 Transfer of title to hw 33.1 Biz Considerations, & RISKS (H) lost Recitals/ Q Contractsoftware, c REqmts Your services & You conducted ref checks & Due PROJECT 4.3 Estim ating meth used; assumps; update procs 12.16 Invoic ing procedures 18.3 Retention of security interest 1, 2, 3 Credibility h 4.4 B’s responsibilities; V’s responsibilities 12.17 Supporting doc s 33.1a “59% of all O/S Ks fail” (Compass '05; Forrester J Feasibility Collaboration were oversold expertise Diligence; What didn’t you do /know? MGMT (PM) 12.18 Required notic e for price incr eases 18.4 Execution of security docss 33.1b SOX/Regs adherance; No subbing to China A Remedies (c) 1991-2008 ©2003-8 e 4. Project Timetable 4.5 Target completion dates by task 12.19 Personnel/serv ices rates to price chg order s 18.5 Release of security interest upon payment 33.1c Think w /cost 70-80% less but only profit 20-30%. RISKS & Training/ RLBernacchi, WS ca n use system! Poor No one “Required staff” never came to 4.6 Final com pletion dates by task 10, 11 Usability W arren S. Reid Reid 5. Proj Mm t & Reporting 12.20 Limits on price increases 18.6 Title xfer to sw (or x-ref to licensing provis) In fact, m ost report 1st year savings of 0% RIGHTS Implement d training primary/refresher training 12. Proj Costs & Pay Sched 4.7 B’s right to delay or cancel proj tasks 18.7 Ow ner/license/mkt rights to V made sw mods 33.1d 'Please You; Don’t Ask?'; 90% of tim e w /say "OK" 4.8 Major perform milestones & relat’shp to pymt sch 12.21 Right to benefit of price r educ tions 22. Loss/Damage Risk 1, 14,15 Selection Stability Sy stem fundamentally flawed We only need 2 months to fix it all 12.22 Relationship to Contract remedies 18.8 Ow ner/license/mkt rights to B made sw mods 33.1e Time Zone diff; Infrastructure poor; 22 official too m any polit parties; Turnover by 23 Ins 24. Price Protect F&F 4.9 Delay remedies & bonuses for early perform 12.23 Payments under protest 18.9 X-ref to license & authorized use provisions 25. Renew Opts 26. 4, 5, 12, Project/Risk You never told us that! You You didn’t follow our recs; You 4.10 Relationship to termination rights 33.1f Security/privacy law s; cyber crim e; terrorism Culpability 12.24 Offset rights 18.10 Rights to use ideas/invent'ns devel dur'g proj Purch Opts 27. Trade- in 13 Mgmt gave poor advice! changed/de layed making decisions 4.11 Prompt notice of anticipated delays 33.1g M/have both orgs' staff on both sites; Build trust Rights 12.25 Relat’shp to dis pute resolution mec hanisms 33.1h Define Success (iterative, increm ental, 8, 9. 14, Bad data conversion/interface cause 6. SITE PREPARATION (D) 19. LICENSE RIGHTS (I) Testing Reliability The system is full of bugs! Contracts take 14. LOW LEVEL, SYSTEM & INTEGRAT'N TESTS (D) 33.1i. OS in internat'l m arket w /o int. ops exper 15 probs. Always have bugs! 6.1 Preparation & delivery of site prep specs 19.1 Exclusive or non-exclusive rights OWNERSHIP time, $, hard work 14.1 Diagnostic tests of hw , infra, netw are 33.1j No variety of perspectives in selection process & 6.2 B’s (or V’s) obligation to prepare site 19.2 Term of license Project You failed as Systems No! YOU failed as the SIPM. That role 14.2 All Kinds of System s: 19.3 Products covered 33.1k Using poorly devel/documented serv/prod spec I PROTECTION 4, 5, 12 Mgmt Responsibility Integration Proj. Mgr. - SIPM was not my job! PRE GO- 6.3 V’s oblig to clarify specs, inspect & certify End-User; MIS; Outsourced; Commercial; 19.4 Types of use permitted: 33.1l Not doing biz/financial due diligence on OS candid LIVE ITEMS 6.4 B’s obligation to approve Military; Operating Systems (latent error stats avail) a. Types of equipment 33.1m Insuff know ledge of OS capacity lim its 18. Title 19. License Rts Bait & Switch! Staff unqual, hi YOU bait & switch! Staff unqualif’d, hi D 6.5 Remedies for improper site preparation 14.3 All manner of tests for funct & '-abilities' incl: 33.1n Not resolv'g ops issues b4 move to K legal 20. IP Rights Indem nity 13 Staffing Availability 6.6 Remedies for inspection errors b. Number of CPUs 21. Confidential/Secure T/O, poor PMs, Steer Com T/O, poor PMs, Steer Com 6. Site Prep Dynam ic tests - ~85% incl: 33.1o No full com plan in effect; no escal, reg sch 7. Config Deliv/Install 6.7 Effect on proj timetable c. Number of users 10. Training 11. Docs - w hite/black box; sub-routine; unit; integ, system Planning/ You stopped good PM & Sys You were unwilling to comply w d. Types of apps OutSourcing: 11 Suitability 14. Low er Level Tests - Interface, data audit, test of/w converted data 33.2 Contract ("K") Considerations (H) SDLC Dev Life Cycle (SDLC) method agreed to/promised/necess methods 15. Accept Tests 7. COMPUTER CONFIG DELIV & INSTALL (D) e. Timesharing or service bureau activities M Kane, W Gross 7.1 Delivery of complete equipm't configuration - new funct; regression; performance; capability; f. Locations © 2007 Michele Kane, Wendy Gross all rights reserved - Indep V&V; Viral, Security; Acceptance; Beta You can define "SUCCESS" either BEFORE contract is 7.2 Delivery of operating sys & other system sw g. Use by affiliates 33.3 Train both Cust & OS mgm 't & operations on O/S K H 33.1 Biz Consid's 33.2 K Consid's signed or AFTER delivery. BUT IT WILL BE DEFINED! Contracts 'Incentivize' Parties to Cooperate 7.3 Access to site - '-ability' (use-, scal-, port-, maint-, reuse-, h. Transfers to other CPUs or locations 33.4 Proc to initiate/request new service, s, projs recover-, failover, stress, bullet & many more 8. CUSTOM PROGRAMMING SERVICES (E) 7.4 Installation obligations of V i. Right to make copies, incl bkup/archiv copies 33.5 Right to use 3rd party OS to in-source/re-source SERVICE POST STAFFING CUSTOMIZE & 7.5 Installation obligations of B Static Tests - ~15% incl: 33.6 Control of arch, tech, and org change stds GO-LIVE CONVERT 8.1 Incorp of functional processing rqmts docs - reviews; w alk-thrus; inspections 19.5 Rights to source code &/or hw mainten docs 16. Warrantees 8.2 V’s obligation to develop custom apps 7.6 Diagnost tests & relat'n to Accept Test provis 33.7 O/S obligs to update w tech advances; refresh tech 17. Maintenance 7.7 Def of completion of equipment installation 14.4 For each test level consider no. of tests and: 19.6 Relat’shp to assignment rights 19.7 Relat’shp to V’s termination rights 33.8 SLAs (how they w k, credits, contin improv oblig, s Contracts force parties E 8.3 Relat’shp to stipulated performance measures 7.8 Remedies for delays in delivery or installat'n - Goal, objectives, success criteria 33.9 Commitments regarding supplier personnel 17. MAINTENANCE (G) G to understand objectives 8. Custom Prog Services 8.4 Relat’shp to proj timetable - Def of accept results to move to next test level 20. PROPRIETARY RIGHTS INDEMNITIES (I) 33.10 Financial terms 17.1 Start date/maint period F 9. Convert/Other Suppt Serv 8.5 Development by V of detailed design specs 7.9 Relat’shp to termination rights - Test tools: decide, acquire, train; # test environs 33.11 Ownership of custom devel/other w ork product 17.2 V’s termination rights 13. Personnel 8.6 Review /approval by B of detailed design specs - Exper test staff: leads, SMEs, analyst, testers, QA 20.1 V’s indem vs infring: patent/ (c)/ trade sec/IP 17.3 Required notice for termination 8.7 ID B's resp to create, dev, link, test new BPR 10. TRAINING (D) 20.2 Notice of claims 33.12 Term ; terminat'n assist services/term in rights 13. PERSONNEL (F) - Test: sched, train'g, environ, equip; access 33.13 Min retent'n per for transit'ned (T) & LT key Ees 17.4 B’s renew rights for guaran period 13.1 V’s staff quals/B’s approv rights; evals; courses; expe 8.8 Prog stds spec; x-ref to sys, prog, user docs std 10.1 V’s obligation to provide training - Test results review : w ho, w hen, turnaround time 20.3 V’s obligation to defend 33.14 Diff for single silo outsourc'g than for “big bang” t 17.5 Relat’shp to performance measures 13.2 Application certified/certificates; Updated CMMi rating 8.9 Specification of change order procedures 10.2 Qualific ations of trainers - No. of shifts, def of scenarios; end-to-end tests 20.4 B’s obligation to cooperate 33.15 Keep staff know l in: apps, biz, in-scope tech, procs to 17.6 Types & Desc of maintenance support 13.3 Periods of Avail 8.10 X-ref to system & acceptance test provisions 10.3 Location of training - Std test docs; signoff; rigor & format of error logs 20.5 B’s right to participate in defense 33.16 K provisions to secure appropriate supplier talent 17.7 Notice of defects or problems 8.11 V’s responsib for acceptable unit/sys test procs 10.4 Stds for acceptable performance 13.4 Prohibitions against interruptions in Availability - Rigor of error root cause id, est to fix, fix process 20.6 V’s oblig to replace/modify infringing products 33.17 K provisions to lim it use of subs (e.g., to China) 17.8 Classific of ty pes & criticality of maint pr obs 8.12 V’s obligat'n to deliv source code & related docs 10.5 Relat’shp to timetable 13.5 Temporary replacements for sickness, etc. - Test metrics to rept progress, issues and probs 20.7 V’s rights to remove infringing products 33.3 Change process: biz, staff, tech, ind stds, law s, 17.9 Required dispatch or respond time(s) 13.6 Right to request replacements 8.13 Relat’shp to proj timetable 10.6 Relat’shp to proj costs 14.5 Desc of error severity levels and time to repair each 20.8 Calc of B’s refund for products removed by V 33.18 Limit unnecess charges: data recovery; serv re-pe 17.10 Escal of maint suppt if delays to correct probs 13.7 Prohibition against removal or reassignment 8.14 Rem edies for delays in completion 10.7 Availability of student matls 14.6 Escalation Process; SWAT - SW Adjudication Team 33.19 Baseline OS resources for ongoing suppt & projs 17.11 Maximum repair time 8.15 Relat’shp to termination rights 10.8 Avail of instructor’s matls & training 14.7 Maintenance service during testing 21. CONFIDENTIALITY & SECURITY (I) 17.12 Uptime guarantees 10.9 Number of trainees to allow C to re-priorit/assign OS services/resources 14.8 Relat’shp to performance measures 21.1 Definition of V’s confidential information 17.13 Replacement of “lemons” 9. CONVERSION & OTHER SUPPT SERVICES (E) 10.10 B’s rights to reproduce & use training matls 21.2 Definition of B’s confidential information 16. WARRANTIES (G) 14.9 Remedies for failure to meet test criteria 33.20 K s/req OS to track: asset type/loc, ID, ser/m odel 17.14 Avail of spare parts or components 9.1 Data convert: plan, cleanse, map; load; audit; S/O 10.11 Continuing Avail of std V classes 16.1 V’s financial condition 14.10 Relat’shp to termination rights 21.3 Scope of V’s obligs for confidentiality/security #s, in serv date; sw /hw vers/upgrades; if ow n: lease, 17.15 Limits on Vs r efurbishment rights 9.2 Data & Apps sched, resources, conversion 10.12 Continuing Avail of on-site training by V 21.4 Scope of B’s obligs for confidentiality/security 16.2 hw w arranties licen/fin resp pty; Tie apps to servers; Log s s 17.16 B’s rights to perform maintenance 16.3 sw w arranties 9.3 Development of test data 10.13 Remedies for delays in provid suitable train 15. ACCEPTANCE TESTING (D) 21.5 Remedies for breach 17.17 B’s rights to maintenance manuals 9.4 Assist to B w ith site acquisition &/or prep 15.1 Live or simulated environ; w new BPR 21.6 Relat’shp to termination provisions 33.21 Coop Oblig: betw OS/C/3rd parties; staff; facilities, 16.4 Service w arranties 17.18 B’s rights to maintenance training 9.5 Assist to B in acquiring other products/services 11. DOCUMENTATION (D) 15.2 Desc of test data & responsibility for prep equip, sw, doc, biz process access; Adding new OSs; 16.5 Pass through of third party w arranties 15.3 Desc of test procedures & criteria 17.19 Limits on B’s rights to perform maintenance 9.6 Assist to B in locating & screening employees 11.1 Desc of types of docs 33.22 K cost reduct'n commits, process improv; Stds im 17.20 Remedies for delays in providing adeq maint 16.6 Relat’shp to performance measures 15.4 Relat’shp to funct rqmts & perform stds 9.7 Coordination of telecom procurement 11.2 Doc stds for user, system & program docs 33.23 Service level improv (esp if SLAs m et but serv uns 17.21 V’s obligation to coordinate third party maint 16.7 Start date(s)/length of w arranty period(s) 15.5 Period of testing 9.8 Responsibility for trouble-shooting 11.3 Relationship to proj timetable 16.8 Relat’shp to maintenance provisions 15.6 Review of test results 33.24 Term inat'n assist: doc plan; staff; all equip, sw , 17.22 B’s right to get maint o/s pr incipal maint period 9.9 Assist to B w ith development of backup plans 11.4 Relationship to performance measures 16.9 Scope of w arranty obligations 15.7 Correction of errors & problems m atl, data, 3rd pty Ks/ tools to prov serv; train C/ 3rd pty 17.23 Limits on incr eases in maintenance fees 9.10 Assist to B w ith backup arrangements 11.5 B’s rights to reproduce docs 16.10 Remedies for failure to meet w arr obligs 15.8 Definition of acceptance in equip, sw , tools; Right to em ploy OS staff; Right to 17.24 B/U equip avail during extended maint periods 9.11 Assist to B in developing security plan 11.6 B’s rights to future docs or enhancements 16.11 Assignability of warranties 15.9 Remedies for failure to meet accept criteria 33.25 Counsel’s role does not end w hen deal signed! 17.25 B’s rights to f uture enhanc ements 9.12 Assist to B in develop'g disaster recovery plan 11.7 B’s rights to source code & related docs 15.10 Relationship to w arranty & maint provisions 16.12 Relat’shp to disclaimers/Limits of V’s liabs 17.26 B’s rights to assign maintenance rights 9.13 Pre-installation machine time 11.8 Remedies for delays or inadequate docs 15.11 Relationship to termination rights 3m © 2006-2009 Warren S. Reid All Rights Reserved 2006- This model will change and be updated over time change 25 w
  • 26. Functional Rqmts & Project Mgmt (areas: 3, 4, 5, 12) This Model contains 32 contract clause areas. NOTE: Less than half of these can be drafted by an IT contracts attorney alone. The others require thoughtful input from CXO(s), CFO, biz domain & MIS leads/ consultants Click for full size view of all contract areas: http://www.wsrcg.c om/PDFs/model_itc ontracting.pdf 26 w 1m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 27. PRE GO-LIVE ITEMS (areas: 6,7,10,11,14,15) This Model contains 32 contract clause areas NOTE: Less than half can be drafted by an IT contracts attorney alone. The others require thoughtful input from CXO(s), CFO, biz domain & MIS leads/ consultants Click for full size view of all contract areas: http://www.wsrcg.c om/PDFs/model_itc ontracting.pdf 27 w 1m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 28. (A) Set the Stage 2. DESC OF SYSTEM (A) 1. RECITALS (A) 2.1 Desc/specs for equip, components, media, cable, etc. 2.2 Configuration warranty 1.1 V’s areas of expertise, experience, etc. 2.3 Desc & specs for sys sw; current; complete; usable 1.2 B’s business & data processing requirements 2.4 Description & specs for packaged apps sw 1.3 V’s ability or experience to handle B’s rqmts 2.5 Desc & specs for custom mods to packaged apps 1.4 Specification/execution of a quality RFP process; required V services 2.6 Desc & specs for custom sw apps to be devel by V 2.7 List & Desc of all manuals, system & user docs, etc. 1.5 B’s issuance of Request For Proposals (RFP) 2.8 Incorp of RFP, proposals, brochures, mktg matls, etc. 1.6 V’s proposal response to B’s RFP; feasibility, honest, suitability 2.9 Sys Def (5 Rs: Right person; truck; tools; addr; time 1.7 Additional docs or communications between B &V 2.10 Definitions of other terms & Relat’shp to system 1.8 Proposal evaluation factors & assumptions 2.11 Testing: proc; types; rqmt; tools; staff; doc; S/O; crit affecting B’s decisions 2.12 x-refs to other K provisions & exhibits (inc Biz Case) 28 s 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 29. (B) What IS the Bargain? 3. FUNCT RQMTS & PERFORMANCE MEASURES 3.1 Desc of biz funct to be performed (or x-ref to RFP) c. Number of users; Locations 3.2 Rqmts Elicitation (RE)/Scope Change Process d. Special features or capabilities - ID specif Users/Classes; assure/sched availability e. Hosting, SaaS, other service act w trial period - Prep timeline; ID RE technq/tools/docs used/produced g. Use by affiliates - Escalation/dispute resolution process h. Transfers to other CPUs or locations - Scope change process: proposed, est all impacts, i. Right to make copies, incl bkup or archiv copies decis crit, doc, update ests, CPM, staff, monitor j. Growth cap meas'ed in increas tranx process rate - Embrace change: Iterative, Incremental, interactive k. Capacity for field modification or enhancement 3.3 Incorp of Functional Requirements Docs l. Other V representations - Rqts incl: success crit; '-abilities'; F&F current/future; 3.6 Performance "-ABILITIES" UI; rpts; biz procs & rules; ops parms; doc map; RTM; SW QA: ['-abilities'] hw, sw, nw, architecture GAPs/changes; rollout plan; test results; sys.stabil;Go- USERS (Extl): Avail- Depend- Flex- Integ- Live checklist; rqts change process/tools; defer/tradeoff; Oper- Reli- Modif- Use- Scala Safety Secur- training plan; converted data; legacy I'face; security Surviv- R&R- Config- Utility; $ Effect [vs benchm'ks] passwords; enabled Ops/ Maint. Groups, etc DEVELS (Internal): Adapt- Audit- Deploy- Reuse- Test- 3.4 Incorp of V’s proposal(s), website, market’g matl, etc. Interop- Maint- Perform- Port- Extense- Struct- 3.5 Performance Parameters: Manufact- Trace- Reuse- TEST- Struct- a. Relationship to functional processing rqmts. 3.7 Relationship to acceptance criteria & testing b. Types & volumes of data to be stored 3.8 Relationship to ongoing maintenance reqmts 29 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 30. (C) Project Management 4. PROJECT TIMETABLE (C) 5. PROJECT MGMT (PM) & REPORTING (C) 4.1 Definition of project tasks 5.1 Steering Committee role, structure, makeup, process 4.2 Definition of deliverables for each task 5.2 SWAT Team role, structure, makeup, processes 4.3 Estimating meth used; assumps; update procs 5.3 Named Sys Integrator's role, resp, auth, accountability 4.4 B’s responsibilities; V’s responsibilities 5.4 Desc of V’s project team; Descrip of B’s project team 4.5 Target completion dates by task 5.5 Designation of V’s PM; Designation of B’s PM 4.6 Final completion dates by task 5.6 Determ SDLC METHOD to be used; rules to deviate 4.7 B’s right to delay or cancel proj tasks 5.7 PM Tools/Measures: EVM; CPM; ETC; $/sch variances 4.8 Major perform milestones & relat to pymt sched 5.8 V’s resp for PM; project rpt'g: format; freq; distrib; 4.9 Delay remedies & bonuses for early perform detail 4.10 Relationship to termination rights 5.9 V’s/B's resp: BPR/new proc dev, link, train, test, approv 4.11 Prompt notice of anticipated delays 5.10 V’s resp to ID, manage, mitigate RISKS, probs, delays 5.11 B’s responsibility to address V's probs/recs in proj rpts 5.12 B’s responsibility to assist V 5.13 B’s responsibility for project problems or delays 5.14 Relationship to project timetable 5.15 Remedies for loss/reassignment of V’s Proj Mgr (PM) 30 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 31. (C) Project Management 12. PROJECT COSTS & PAYMENT SCHED (C) 12.19 Personnel/services rates to price chg orders 12.1 hw prices, if purchased (incl “bundled” sw) 12.20 Limits on price increases 12.2 sw prices, if purchased (& if 2b stated sep 12.21 Right to benefit of price reductions 12.3 Rental or lease pymts & method of calc 12.22 Relat’shp to K remedies 12.4 License fees for sw 12.23 Payments under protest 12.5 Training fees 12.24 Offset rights 12.6 Maintenance fees for equipment &/or sw 12.25 Relat’shp to dispute resolution mechanisms 12.7 Fees or charges for other services 12.8 Partial payments tied to major milestones 12.9 Start date for rental or lease payments 12.10 Commencement date for license fees 12.11 Commencement date for maintenance fees 12.12 Credits or offsets for delays or failures 12.13 Refunds if K is terminated 12.14 Most favored nation clause 12.15 No mods/addtl charges w/o written approval 12.16 Invoicing procedures 12.17 Supporting docs 12.18 Required notice for price increases 31 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 32. (D) Pre- Go-Live Tasks 6. SITE PREPARATION (D) 10. TRAINING (D) 6.0 ID of general contractor; roles and resp; liens; overall 10.1 V’s obligation to provide training schedule 10.2 Qualifications of trainers 6.1 Preparation & delivery of site prep specs 10.3 Location of training 6.2 B’s (or V’s) obligation to prepare site 10.4 Stds for acceptable performance 6.3 V’s obligation to clarify specs 10.5 Relationship to timetable 6.4 V’s obligation to inspect & certify 10.6 Relationship to proj costs 6.5 Remedies for improper site preparation 10.7 Avail of student matls 6.6 Remedies for inspection errors 10.8 Avail of instructor’s matls & training 6.7 Effect on project timetable 10.9 Number of trainees 10.10 B’s rights to reproduce & use training matls 7. COMPUTER CONFIG DELIV & INSTALL (D) 10.11 Continuing Avail of std V classes 7.1 Delivery of complete equipment configuration 10.12 Continuing Avail of on-site training by V 7.2 Delivery of operating sys & other system sw 10.13 Remedies for delays in provid suitable train 7.3 Access to site 7.4 Installation obligations of V 11. DOCUMENTATION (D) 7.5 Installation obligations of B 11.1 Desc of doc types; Docs stds: user, test, system docs 7.6 Diagnostic tests & relation to Acceptance Test provision 11.3 Relationship to proj timetable & performance measures 7.7 Def of completion of equipment installation 11.5 B’s rights to reproduce & to future docs/enhancements 7.8 Remedies for delays in delivery or installation 11.7 B’s rights to source code & related docs 7.9 Relationship to termination rights 11.8 Remedies for delays or inadequate docs 6m © 2006-2009 by Warren S. Reid All Rights Reserved 32 s
  • 33. (D) Pre- Go-Live Tasks 14.4 For each test level consider no. of tests and: 14. LOW LEVEL, SYS’M & INTEGRAT TESTS (D) - Goal, objectives, success criteria 14.1 Diagnostic tests of hw, infra, netware - Def of accept results to move to next test level 14.2 All Kinds of Systems: - Test tools: decide, acquire, train; # test environs End-User; MIS; Outsourced; Commercial; - Experience test staff: leads, SMEs, analyst, testers, QA Military; Operating Systems (latent error stats avail) - Test: sched, training, environ, equip; access - Test results review: who, when, turnaround time 14.3 All manner of tests for funct & '-abilities' incl: - No. of shifts, def of scenarios; end-to-end tests Dynamic tests - 85% incl: - Std test docs; signoff; rigor & format of error logs - white/black box; sub-routine; unit; integ, system - Rigor of error root cause id, est to fix, fix process - Interface, data audit, test of/w converted data - Test metrics to rept progress, issues and probs - new funct; regression; performance; capability; 14.5 Desc of error severity levels/time to repair each - Independent V&V; Viral, Security; Acceptance; Beta 14.6 Escalat Process; SWAT - SW Adjudication Team - '-ability' (use', scal-, port-, maint-, reuse-, 14.7 Maintenance service during testing recover-, bullet, and many more 14.8 Relationship to performance measures Static Tests - 15% incl: 14.9 Remedies for failure to meet test criteria - reviews; walk-thrus; inspections 14.10 Relationship to termination rights 33 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 34. (D) Pre- Go-Live Tasks 15. ACCEPTANCE TESTING (D) 15.1 Live or simulated environ; w new BPR 15.2 Desc of test data & responsibility for prep 15.3 Desc of test procedures & criteria 15.4 Relationship to functional rqmts & perform stds 15.5 Period of testing 15.6 Review of test results 15.7 Correction of errors & problems 15.8 Definition of acceptance 15.9 Remedies for failure to meet accept criteria 15.10 Relationship to warranty & maint provisions 15.11 Relationship to termination rights 34 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 35. (E) Customize and Convert 8. CUSTOM PROGRAMMING SERVICES (E) 9. CONVERSION & OTHER SUPPT SERVICES (E) 8.1 Incorp of functional processing rqmts docs 9.1 Data conversion 8.2 V’s obligation to develop custom apps 9.2 Application program conversion 8.3 Relat’shp to stipulated performance measures 9.3 Development of test data 8.4 Relat’shp to proj timetable 9.4 Assist to B with site acquisition &/or prep 8.5 Development by V of detailed design specs 8.6 Review/approval by B of detailed design specs 9.5 Assist to B in acquiring other products/services 8.7 Specification of programming stds 9.6 Assist to B in locating & screening employees 8.8 X-ref to system, program, & user docs stds 9.7 Coordination of telecom procurement 8.9 Specification of change order procedures 9.8 responsibility for trouble-shooting 8.10 X-ref to system & acceptance test provisions 9.9 Assist to B with development of backup plans 8.11 V’s resp for acceptable unit/sys test procs 9.10 Assist to B with backup arrangements 8.12 V’s obligat to deliv source code & related docs 9.11 Assist to B in developing security plan 8.13 Relationship to project timetable 8.14 Remedies for delays in completion 9.12 Assist to B in develop'g disaster recovery plan 8.15 Relat’shp to termination rights 9.13 Pre-installation machine time 35 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 36. (F) Personnel 13.1 V’s staff qualifications/B’s approval/denial rights; Staffs’ evals; courses taken; experience & expertise 13.2 Application certified/certificates; Updated CMMi rating 13.3 Periods of Availability 13.4 Prohibitions against interruptions in Availability 13.5 Temporary replacements for sickness, etc. 13.6 Right to request replacements 13.7 Prohibition against removal or reassignment 13.8 Ability to pass on V's staff salary raises to B 36 s 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 37. (G) Post Go-Live Services 16. WARRANTIES (G) 16.1 V’s financial condition 16.2 Hardware warranties 16.3 Software warranties 16.4 Service warranties 16.5 Pass through of third party warranties 16.6 Relat’shp to performance measures 16.7 Start date(s)/length of warranty period(s) 16.8 Relat’shp to maintenance provisions 16.9 Scope of warranty obligations 16.10 Remedies for failure to meet warranty obligs 16.11 Assignability of warranties 16.12 Relat’shp to disclaimers & Limits of V’s liabs 37 s 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 38. (G) Post Go-Live Services 17. MAINTENANCE (G) 17.14 Avail of spare parts or components 17.1 Start date(s) & length of maint period(s) 17.15 Limits on Vs refurbishment rights 17.2 V’s termination rights 17.16 B’s rights to perform maintenance 17.3 Required notice for termination 17.17 B’s rights to maintenance manuals 17.4 B’s renewal rights for guaranteed period 17.18 B’s rights to maintenance training 17.5 Relat’shp to performance measures 17.19 Limits on B’s rights to perform maintenance 17.6 Types & Desc of maintenance support 17.20 Remedies for delays in providing adeq maint 17.7 Notice of defects or problems 17.21 V’s obligation to coordinate third party maint 17.8 Classific of types & criticality of maint probs 17.22 B’s right to get maint o/s principal maint period 17.9 Required dispatch or respond time(s) 17.23 Limits on increases in maintenance fees 17.10 Escal of maint suppt if delays to correct probs 17.11 Maximum repair time 17.24 B/U equip avail during extended maint periods 17.12 Uptime guarantees 17.25 B’s rights to future enhancements 17.13 Replacement of “lemons” 17.26 B’s rights to assign maintenance rights 38 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 39. (H) SPECIAL OUTSOURCING CONSIDERATIONS 33.1 BIZ CONSIDERATIONS & RISKS (H): 33. 1a “59% of all O/S Ks fail” (Compass '05; Forrester '07) 33. 1b SOX/Regs adherance; No subbing to China 33. 1c Think w/cost 70-80% less but only profit 20-30%. In fact, most report 1st year savings of 0% 33. 1d 'Please You; Don’t Ask?'; 90% of time w/say "OK" 33. 1e Time Zone diff; Infrastructure poor; 22 official langs; too many polit parties; Turnover by “Group/Floor” 33. 1f Security/privacy laws; cyber crime; terrorism 33 .1g Must have both orgs' staff on both sites; Build trust 33. 1h Define Success (iterative, incremental, interactive) 33. 1i OS in international market w/o int. ops experience 33. 1j Not using variety of perspectives in selection process 33. 1k Using poorly devel/documented serv/prod spec 33. 1l Not doing biz/financial due diligence on OS candid 33. 1m Insuff knowledge of OS capacity limits 33. 1n Not resolv'g ops issues b4 move to K legal aspects 33. 1o No full com plan in effect, incl escal, reg sch meets, 39 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 40. (H) SPECIAL OUTSOURCING CONSIDERATIONS 33.3 Change process: biz, staff, tech, ind stds, laws, regs 33.2 CONTRACT ("K") CONSIDERATIONS (H): & efficiency gains. Limit OS abil to charge for such © 2007 Michele Kane & Wendy Gross All rights changes reserved 33.18 Limit unnecess charges: data recovery; serv re- 33.3 Train both Cust & OS mgmt & operations on O/S K perform 33.4 Proc to begin/request new service, changes, projs 33.19 Baseline OS resources for ongoing suppt/projects 33.5 Right to use 3rd party OS to in-source/re-source to allow B to reprioritize services and reassign OS 33.6 Control of arch, tech, and org change stds resources 33.7 O/S obligs to keep pace/refresh w tech advances 33.20 K s/req OS to track (at min): asset type/location, ID, ser/model #s, in serv date; sw/hw vers/upgrades; if 33.8 SLAs: how they wk, credits, contin impr oblig, chg own, lease, license & fin resp party; Apps tied to server; Changes 33.9 Commitments regarding supplier personnel 33.21 Coop Oblig: betw OS/C/3rd parties; staff; facilities, 33.10 Financial terms equip, sw, doc, biz process access; Adding new OSs; 33.11 Ownership of custom devel & other work product 33.22 K cost reduct'n commits, process improv; Stds 33.12 Term, terminat assist services, rights to terminat implem 33.13 Min retention per for transitioned/L Term crit Ees 33.23 Service level improv (esp if SLAs met but serv unsatis 33.14 Diff for single silo OS than for “big bang” tranx 33.24 Terminat'n assist: doc plan; staff; all equip, sw, 33.15 Keep staff knowl: apps, biz, tech, procs to mg OS matl, data, 3rd pty Ks/ tools to prov serv; train C/ 3rd pty in equip, sw, tools; Right to employ OS staff; 33.16 K provisions to secure approp supplier talent: Right to pur equip/assume leases 33.17 K provisions to limit use of subs (e.g., to China) 33.25 Counsel’s role does not end when deal signed! 40 w 6m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 41. Some Important Legal Clauses/Thoughts In Virtually ALL Contracts (IT and Otherwise) Assumptions and Goals Do You Really Want to Avoid Litigation? Attorneys’ Fees Don’t Do A Contract Until You Know What Is Being Delivered Venue Choice of Law Under the Subject Matter Indemnification Alternative Dispute Resolution Arbitration 2m © 2006-2009 by Warren S. Reid All Rights Reserved 41 s
  • 42. Assumptions and Goals Assumptions and Goals These tips apply to contracts where 2 sides might have different business goals Even real “partners” don’t always agree NOTHING like a mutual profit to make people forget they don’t like each other No contract is so large, or so small, that you can’t have a dispute There are good choices that can Do You Really Want to Avoid be made Litigation? Litigation is getting into court, or staying out of court, whichever is better for you in the particular situation. You may not want to be in court, but that doesn’t mean you want to tell other side about your preferences 42 s 3m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 43. Some Important Legal Clauses Attorneys’ Fees Clause Don’t Do A Contract Until Notice the location of the apostrophe You Know What Is Being Are you more likely to be paying or Delivered collecting fees NO substitution for specifications!! Experts witnesses & costs are *not* If business people understand what attorney’s fees they are getting (or giving) then: Very important to say “reasonable” Better chance they won’t fees or “all” fees (maybe) ask about litigation Scope of the clause They should be able to explain it If not, be sure they don’t complain Only for collection of monies due about the fact that a jury will be Mutuality may be presumed by deciding for them – years later! law 43 s 4m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 44. More Important Legal Clauses Venue Clause An idea to minimize litigation, and avoid dispute over two different locations “If you sue me, it must be in my location. Choice of Law Clause If I sue you, it must be in your location.” Few cases are resolved Before you insist on location, based on which choice of make sure you’ll law is used be there in 5 yrs It is difficult for counsel to agree to a body of law which they don’t know 44 s 4m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 45. More Important Legal Clauses Understand the Subject Indemnification Clause Matter “Indemnification” is a Misnomer – You must understand the subject Correct Term is: “Invitation to matter in order to include Litigation” appropriate remedies and Indemnification just about never protections works We’re in court because attorneys try to fake this all the time It’s why you need an IT Contracting Team 45 s 4m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 46. More Important Legal Clauses ADR Arbitration Clauses The term is a misnomer – Mediation Make sure that your client and Arbitration should not be understands that the arbitrator referred to in the same paragraph is not required to follow the law The only time when mediation is a If you want the right to appeal, bad idea is when the subject matter you need to set a mechanism isn’t worth talking about (which outside of the courts means: “not worth litigating”) Limitations on discovery may, or may not, be to your advantage Establish arbitrator(s) quals 46 s 4m © 2006-2009 by Warren S. Reid All Rights Reserved
  • 47. 1. Scratched underside of the Iceberg 2. Both sides Lose in Litigation: See it from both sides 3. Contracts allocate risk: Get it in writing Up front 4. Negotiate for “Intention”: NOT “Principle!” 5. Here are our needs! U devel clauses! We select best! 6. Be Flexible: everything not = in import or linear 7. If you want to end w Success, start w Success 8. You NOW know the risks! Manage them! 9. Perform OUTSTANDING Reference Checks 10. Follow good methodologies 11. Measure: Quantity & quality, Progress & Status 12. No Panaceas: Consider SWAT, Mediation, ADR © 2006-2009 Warren S. Reid All Rights Reserved 4747 w 10 m
  • 48. AFTER YEARS OF EXPERIENCE: THE GOLDEN ANSWER! h d(y) : p+ : f(y)(l)+ (c) = P2R © 2006-2009 Warren S. Reid All Rights Reserved 2m 48 w
  • 49. Closing Comments, Thoughts & Questions WSR CONSULTING GROUP, LLC Management, Technology, e-Business & Litigation Consulting Warren S. Reid, Managing Director PH: 818/986-8832 E-mail: wsreid@wsrcg.com Website: www.wsrcg.com By Steve Brower, Esquire Buchalter Nemer PLC, Shareholder E-mail: sbrower@buchalter.com Website: www.buchalter.com Office: 714/549-5150 More related materials can be found at: http://www.wsrcg.com 4m © 2006-2009 by Warren S. Reid All Rights Reserved 49 s
  • 50. Additional Resource Materials Introducing “The Four IT Success Models”: For full size views of the “IT Success Models” go to: • http://www.wsrcg.com/PDFs/model_riskipedia.pdf • http://www.wsrcg.com/PDFs/model_requirements.pdf • http://www.wsrcg.com/PDFs/model_itcontracting.pdf • http://www.wsrcg.com/PDFs/model_cpritprojturn.pdf Technology Players Business • Software Arch. Players • Systems Eng. • CEO, CXO II. REQUIREMENTS model • Project Manager • CFO, CIO • Tech Steer Comm I. RISKIPEDIA 2.0 model III. CONTRACTS model . WSR Consulting Group, LLC IT Experts & Expert Witnesses Our Four IT Success Models address today’s most confounding IT challenges: Risk, Requirements, Law, & Project Recovery. IV. CPR model Legal Players “Cooperative Project Recovery” • In-House Counsel • Special Counsel • Litigation Counsel Directory to WSR Consulting Group’s “Four IT Success Models” © Copyright 2008 Warren S. Reid All rights reserved 2m © 2006-2009 by Warren S. Reid All Rights Reserved 50 w

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