One of the areas powering Singapore’s economic growth and development as a hub is in the sphere of Information and Communications Technology (ICT or infocomms for short). It is a key contributor to Singapore’s economy with revenues for the industry hitting S$83.09 billion in 2011, representing an 18% growth in revenue from the previous year alone (source: IDA).
As the Economic Development Board (EDB) points out, Singapore is a global data management hub and is home to more than 80 of the top 100 software and services companies. Furthermore, many of these companies, including the top 15 software companies, have their regional or Asia Pacific headquarters here in Singapore.
But just as infocomms provide the backbone of most major systems across other sectors and industries, these companies are themselves looking to so-called managed services to outsource or otherwise automate non-core functions like IT support, accounts or even the maintenance of operations equipment. Whilst these initiatives tend to result in significant cost savings and better enable companies to focus on their core businesses, there are still some risks involved.
For example, in design and development projects, typical disputes that arise include delay claims and failures to meet technical specifications. The common defences raised by vendor suppliers are that (i) the customer failed to specify its requirements; and (ii) it was the customer’s subsequent variations to the specifications that resulted in project drift and/or scope and feature creep.
In outsourcing/managed services contracts, common complaints include failure to meet service level agreements and pricing disputes. Such disputes could arise due to a service provider’s failure to consider customer dependencies (for example a reliance on the proper working of the customer’s servers) and misunderstandings over who is responsible for certain critical dependencies.
Our new Technology and Outsourcing Hot Spots series will focus on identifying and resolving some of the more common pitfalls and problem areas in typical contracts involving technology and outsourcing.
Subsequent posts in this series will address the following topics:
- Pre-project scoping and the need to be explicit in setting out the scope of work. We will discuss issues of marketing puff, pre-contractual misrepresentations, entire agreement clauses and limitation of liability.
- Governance and change issues including variation orders and clauses, price review mechanisms and the enforceability of an agreement to negotiate in good faith any further price changes.
- Dispute resolution issues including the drafting of appropriate dispute resolution clauses and post-termination issues like post termination migration assistance.