Increased disputes in challenging times

A more difficult economic climate can lead to a higher probability of disputes arising in connection with IT transactions. Such disputes may arise because organizations that invested heavily in technology in anticipation of growth may want to cut back on their technology infrastructure. This may result in organizations wishing to amend or terminate some of their existing agreements with a view to reducing the amounts to be expended for hardware or software or for support or other services.

An organization may also wish to reduce its personnel, including the personnel responsible for the management and oversight of IT projects and the personnel responsible for the operation of support desks. A more rapid turnover of personnel, particularly at the senior level, may result in an organization changing its business strategy and its plans for the deployment of technology. This again may result in projects being terminated or modified, perhaps at the expense of the technology supplier.

An organization may also seek to replace technology that has high operating costs with cheaper alternatives. It may seek to introduce new business models, such as the use of products and services built on an open source platform, or the use of Software as a Service or cloud computing model. The introduction of these business models may result in the adoption of contracts which are not fully developed or well-understood.

Avoiding disputes before they arise

Because of the challenges associated with difficult economic times, it is important to find new means for limiting the possibility of disputes before they arise. One means of achieving that objective, particularly in the case of agreements for complex IT transactions, is to include in the agreement comprehensive provisions addressing such matters as the resolution of incidents and problems; the management of changes; the overall governance of the relationship (such as by assigning clearly defined roles and responsibilities to different key personnel and teams, and requiring frequent meetings and effective communications); requirements for detailed reporting by the supplier on its performance under the agreement; provisions for the auditing of the supplier’s performance; and requirements for periodic benchmarking and updating of the prescribed performance standards.

Mechanisms for the resolution of disputes

It is also important to consider various provisions to require the prompt resolution of disputes when they arise. These provisions may require any disputes to be escalated to senior management levels as soon as possible, and provide for unresolved disputes to be submitted to mediation, arbitration or both.

Any provisions included in an agreement dealing with dispute resolution must be crafted carefully in relation to other provisions of the Agreement. For example, the agreement should require a supplier to continue to perform its obligations notwithstanding the existence of a dispute. The agreement should also include provisions to ensure the expeditious resolution of disputes with respect to critical issues. Both parties to an IT transaction will also want to reserve the right to seek court protection in the case of disputes involving risks to an organization’s intellectual property or confidential information, or that involve threats to any repositories of personal information for which an organization may be responsible.

Use of innovative approaches

Because of the increased possibility of disputes in IT transactions and the growing pressure to find ways of resolving such disputes as expeditiously as possible, parties to an IT transaction are seeking innovative approaches to the resolution of disputes.

The IT industry can obtain guidance in this regard from the much longer history of finding mechanisms for resolving disputes in the construction industry. For example, it is common in that industry to adopt a collaborative conflict management process known as “partnering”, where various formal and informal processes are adopted to resolve disputes based on interest-based negotiations as quickly as possible. A similar mechanism involves the adoption of an independent body known as a “dispute board” that is established at the outset of a project and that remains in place until its completion. The dispute board is empowered to render decisions at an early date. These decisions are binding on the parties during the course of a project, but may be subject to review or appeal in a later proceeding.