Drafting IT Outsourcing Contracts: Jurisdiction, Change Process, Recordkeeping, Client Privacy, Security, Insolvency

Description

IT outsourcing contracts can be intensely complex documents.

Outsourced IT often includes the work of international organizations, which introduces the problem of jurisdiction. A contract with a foreign supplier should protect the client in a lawsuit, but it should also spell out where and how a trial should be brought to court. As projects, technologies, and industries change, contracts must be adjustable to address those changes. A straightforward "change process" in an agreement will include the exact details of this mechanism.

Because IT vendors may have access to performance information that may be fundamental to the facts in the event of a dispute, it’s essential to include a record-holding clause in your agreement. A contract should require a vendor to provide data subject to litigation, and should require that the vendor not delete such information without providing ample notice to the client and a requirement to provide copies of the information to the client if requested. Further, transmitting data to any client, even an IT specialist, creates security vulnerabilities. An agreement should establish security metrics as a benchmark for data protection with an outside network.

In some cases, engaging an IT vendor may interfere with previously negotiated client contracts, especially when protecting their privacy. To avoid potential legal trouble and lost accounts, the IT outsourcing agreement must cross-reference with current client privacy and security protections. Provisions must be as strict as outlined for existing clients. While most vendors plan to stick around for a long, long time, this is not always reality. If an IT vendor suddenly folds, it can have devastating consequences, including requiring vendors to send periodic financial statements or stipulations guaranteeing access to source code if a vendor goes out of business.

Arbitration is valuable in multinational outsourcing arrangements. It avoids conflicting laws, inconsistent procedural rules where it is possible that complying with one country's rules entails violating another's, conflicting discovery rules, and differing roles of judges and juries. Arbitration over Zoom and other virtual platforms provides advantages, including obtaining quality arbitrators when time and cost of travel become less of an issue.

Listen as our expert panel discusses which key provisions to focus on when drafting an IT outsourcing agreement. The panel will address the best practices of when to outsource, mitigate risks to clients, and vet a vendor before outsourcing.