By Alan Gahtan - March 31, 2003
The Ontario Bar Association’s Information Technology and E-Commerce Section was the sponsor of a well attended session on outsourcing at this year’s Annual Institute.
Paul Emanuelli, Crown Counsel with the Management Board Secretariat, opened the program with a session on Requests for Proposals and other tender call documents. Paul explained the purpose and importance of distinguishing between mandatory and rated requirements. In most cases, the issuance of an RFP to which a proponent responds will create a contract between the parties. Deficiencies in the RFP process can create liability for the issuer and a risk to the successful bidder of having the procurement arrangement set aside.
Matthew Snell, senior legal counsel with IBM, covered the key considerations involved in outsourcing information technology. He made good use of four or five of the now famous IBM TV ads we’ve now all seen on the tube.
Kevin Taylor, a senior associate with Brown Raysman’s New York Office flew in to cover the elements of Business Process Outsourcing as well as providing an overview of the general legal elements of outsourcing transactions.
Mary Beth Currie of Bennett Jones followed with an overview of employment issues in outsourcing. Many outsourcing transactions involve the transfer of employees. If not structured properly, such transfers can trigger significant notice, termination and severance payment obligations. Fortunately, most sophisticated outsourcing transactions can be structured to reduce such risks. If not handled properly, successor employer obligations can saddle an outsourcer with certain liabilities of the former employer. Another gotcha that was identified was intellectual property agreements. Such agreements may not be enforceable by the new employer and may need to be re-executed.
Yours truly discussed service levels and benchmarking. Service levels, and associated remedies, are used to align the outsourcing service provider’s interest with those of the customer. Service levels are an important component of an outsourcing arrangement but all too often are left too late in the negotiation process. Ideally, customers should track their historical service level performance prior to engaging in negotiations with the service provider.
Gabor Takach of Torys and Bernice Karn of Cassels spoke about Application Service Provider agreements. Gate highlighted how in an ASP situation, the customer may not even receive an object code license and how escrow can become an event more important consideration. Gabe also highlighted that the bankruptcy bar has picked up on software escrow and that CCAA orders, which contain a long list of things that can’t be done without court approval, are now increasingly including prohibitions on access rights to the escrowed materials.
Peter Wilson of Unisys
Increasingly, outsourcing transactions are not restricted to Canada. Joe Hester of Accenture’s legal group covered the various types of cross border deals and contracting structures. Important issues that need to be considered in such transactions include employment and immigration issues, regulatory issues, taxes and choice of law provisions.
Michael Erdle of Deeth Williams Wall closed the program with a session of IT dispute resolution. Michael surveyed the typical issues that arising in the context of outsourcing deals, the typical postures of customers and suppliers. He also discussed strategies for resolving disputes and the pros and cons of arbitration verses litigation.
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