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Information Technology Outsorcing Transaction - Halvey K.J.

Halvey K.J. Information Technology Outsorcing Transaction - Wiley Publishing, 2005. - 649 p.
ISBN-10 0-471-45949-6
Download (direct link): informationoutsourcingtransactions2005.pdf
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It is in both parties’ interests to be as detailed as possible in the contract with respect to their obligations to the customer’s former employees. In this regard, the IT outsourcing contract typically provides for a transition period during which the customer will provide notice to and terminate employees who will no longer be required to provide the applicable IT services. As these employees are terminated, the vendor then offers employment to the individuals it intends to hire. Transition periods may run from three to six months. Another important aspect of the transfer of employees from the customer to the vendor is that the customer’s relationship with the vendor may not continue indefinitely. For this reason, the customer may wish to retain certain key employees familiar with its IT operations and requirements to ensure that any migration to another vendor will be adequately supported. Similarly, the customer may wish to expressly retain the right to solicit certain vendor personnel, most notably those who previously worked for the customer, upon expiration or termination of the IT outsourcing contract. A more detailed discussion of employee transfer issues is set forth in Chapter 7.
142 Ch. 4 Outsourcing Contract
(j) STAFFING. Each party typically appoints one individual to manage the IT outsourcing contract and the overall provision and receipt of services. The vendor’s representative will play an important role in the customer’s organization and will interface with the customer’s senior management, so the customer usually wishes to have the right to interview and approve such an individual before appointment. Other possible restrictions on the vendor’s representative include requirements that a particular individual remain on the account for a period of time and that this person be dedicated to the customer’s account on a full-time basis. Similar provisions often apply to other employees of the vendor whom the parties consider key to the IT outsourcing relationship.
(k) TRANSFER OF ASSETS. Many IT outsourcing arrangements include the transfer of all or some of the assets and/or facilities used to provide the IT process services or facilitate IT operations. This transfer is often a critical part of the business deal because it may enable the customer to move assets or facilities off its books and, in some instances, receive a much-needed cash infusion or lumpsum payment. In cases where there is an asset or facility transfer, the parties will need to negotiate a purchase and sale agreement (which is typically attached to the IT outsourcing contract as an exhibit).
(l) MANAGEMENT AND CONTROL. The parties will need to discuss how the procedures for managing and performing the services will be handled. In many cases, the IT outsourcing contract will require the vendor to develop a management procedure manual, as well as a manual detailing the vendor’s day-to-day procedures. In addition, the parties will need to discuss how changes to the scope of services, manner of delivery of services, and service levels will be handled. Finally, as earlier discussed under “Integration,” the parties should negotiate the vendor’s obligation to comply with the customer’s standards, methodologies, and architectures as they may be in effect from time to time during the term of the IT outsourcing contract.
(m) CUSTOMER RESPONSIBILITIES. Just as important as developing a detailed description of services to be provided by the vendor (discussed earlier under section 4.3(b), “Scope of Services”) is identifying the roles and responsibilities of the customer. The customer typically wishes to retain certain strategic responsibility, which should be clearly set out in the IT outsourcing contract. In addition, the customer may be obligated to provide or make available certain services or assets, such as desktops, supplies, space, parking, and telephone services, as part of the business deal.
(n) INTELLECTUAL PROPERTY. Because the outsourcing of a customer’s IT operations will undoubtedly involve the access to and use or development of valuable intellectual property, issues relating to intellectual property envelop the IT outsourcing transaction. A discussion of several of these issues follows:
4.3 Key Contract Issues 143
Ownership rights. As a general matter, the IT outsourcing contract should include provisions with respect to the ownership of, and each party’s right to use, any intellectual property assigned or licensed to the vendor or used by the vendor in providing services to the customer. Examples of the types of intellectual property that may be addressed in the IT outsourcing contract include the following:
о Methodologies
о Tools
о Software
о Firmware
о Patents
о Inventions
о Improvements that are used or developed in connection with the provision of the IT outsourcing services
о Related documentation
о Residual knowledge
о Trademarks
Different ownership and use rights may apply to items that are customer proprietary, leased or licensed by the customer from a third party, vendor proprietary, leased or licensed by the vendor from a third party, and newly developed or acquired. Ownership and use rights with respect to third-party intellectual property and vendor intellectual property are highlighted next.
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