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IT Contracts: What You Need To Know

IT Contracts

IT Contracts: What Do We Talk About?

In the business world, we move through contracts. Of all sorts. From the unwritten to the formal. Employment, purchase, and rental contracts are just some of them. But there is one that in these times of Covid-19 is particularly relevant. It’s the Information Technology contract (IT contracts). What does it mean? It is the agreement whose purpose is the licensing, transfer, or provision of an IT commodity or service.

Now, it’s not the idea of this post to go into deep commercial and legal technicalities. We would like to emphasize some points that are important to review when closing an agreement of these characteristics. Of course, many times it’s not feasible to modify them since many developers or providers don’t accept to do it. In that case, it’s essential to consult with an SME lawyer or with an IT procurement professional, so that he/she can evaluate the possible effects of the acceptance of particular clauses.

Points To Consider

These are some of the most important points within a contract to take into account when buying an IT asset or service:

  • Performance: The actual performance of the product we are purchasing must be made clear in the contract. Many times there is a difference between what the technical/commercial documentation indicates and what the asset or service actually delivers.
  • Price: It’s important to determine the price to be paid. If it’s a single payment, installments, monthly or annually. You should also check if there are additional payments for upgrades or annual renewals. 
  • Availability: Very important point, especially in cloud services. Although this can be established in an SLA (Service Level Agreement), in standard software acquisitions it can be in the same agreement. Attention must be paid to the response times of the provider’s technical service in the event of any problem.
  • Customization: In case of having required that the asset or service had special or adapted characteristics, they should be specified in the contract.
  • Legal: Among the legal clauses that may contain an IT contract, as we said, should be reviewed by a legal professional are
    • The right to audit the company’s systems in relation to the use of the product/service.
    • Proprietary, confidential, or trade secret related language.
    • Compensation in favor of the developer/supplier.
    • Use of personal information.

In Summary

Finally, the IT contracts are only an integral part of the IT procurement process. Therefore, beyond taking into account their specific content, it must be analyzed as a whole, so that every penny spent is worthwhile.

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