Wednesday, 20 November 2013

IT Disputes and Project Management - Some Thoughts from Talentum's Seminar 20.11.2013

Excellent fall for everyone! I though that I write this time some words about today's seminar at Talentum in which I had a pleasure of giving a speech. Despite my presence the speaker list was very impressive containing Mikko Manner of Roschier, Kai Erlund of Krogerus, Markus Kinni of Deloitte, JP Rautiainen of Kesko, Tytti Hallavo of Sininen Meteoriitti, Max Mickelsson of Microsoft and Mats Welin of Hästö just to mention a few. I have to say that personally it was just magnificient to be in such a good company and even if the morning was very grey and rainy, and just to illustrate whether conditions, even my dog did not want to go out, I was full of energy and truly eager to go there. It turned out an event to be worth waiting for and I must say I have seldom been in such an interactive event - perhaps it was not surprising as so many of us were passionate about IT projects and disputes! 

My below slides are in Finnish unfortunately, but I started with outlining some general industry trends from the past decade and so, development of license and service fee matrixes, role of contract negotiations in general and following with the reasons why so many IT projects fail. Some main themes relate to project management tasks and how project management should change if we are facing with a potential IT dispute. I also raised some points on the selection of appropriate measures for a specific dispute and how to evaluate cancellation, termination, discontinuation obligation, damages, unjustified enrichment and price reduction arguments and burden of proof issues. I would argue that more attention should be paid to error tolerance where we have a quite high threshold still despite the fact that the world is changing at an ever increasing pace towards something I call "Quality-driven IT Contracting". 

Some more detailed issues should probably be mentioned as well and one not so widely discussed legal issue in our jurisdiction is the relationship between price reduction and damages claims. I would argue that more attention should be paid to the limitation of liability clauses to limit potential exposures in this respect. I would personally not necessarily support the view that the intention of the parties is that limitation of liability clauses automatically also limit the amount of price reduction claims. Enrichment prohibition should naturally be taken into account whether the claim is damages, price reduction or both.

Another point is that sometimes one also see termination of a project on the basis of termination for convenience (as opposed to material breach) followed by damages claim AND unjustified enrichment claim. I have a clear view on the merits of this latter claim, but what do you think? I will save something for the next discussion or post your view and I might reply.

Check my slides from: here

Mikko Manner's presentation followed mine, covering IT audits and key points were that "...audits are more than license compliance audits; they are useful tools for the business, CIOs and lawyers alike for a variety of purposes, as long as all involved have the right approach and implement the approach properly in the agreement and real life alike". Very valuable points and also good contracting issues were discussed. As auditing is here to say, from license audit perspective I raised an issue that perhaps license management and auditing could play more important role in on-going services agreements and this way taken into more efficient use - not only for the license compliance purpose, but for a wider use to benefit customers in their corporate governance.

Then we had a panel discussion chaired by Kai Erlund which centred, at least I would summarize it, around the theme of "communication". The latest IT trends are based on cloud solutions and BYOD, and lots of discussions took place on the selection of the right negotiation team (and "who is actually the customer"), communication of the customer's business requirements such as NFRs and FRs properly and generally on understanding of the suppliers business logic in cloud environment. It seem to be agreed that neither agile nor waterwall methods provide a bullet proof solution to avoid budget, time or scope disputes, but at least by good communication (also contractual reporting) you minimize risks.

The day was concluded by Mats Welin who gave a speech on litigation process perspectives. In the project management organization it is important to understand what is needed if we end up in a litigation and we need to provide evidence to support our case what are, e.g., additional personnel costs arising out of a breach. Failing to implement right measures will almost certainly mean that the arbitration or ordinary court will deem that you have not provided "sufficient evidence". So in other words, the project management should need to change the focus a bit when litigation seems probable and adopt new kind of measures. From legal side I had a discussion on price reduction and are courts allowed estimate the amount of price reduction like they can estimate damages (OK 17:6), and further it was discussed, a question asked by Otto Markkanen of Castrén & Snellman, that can you raise price reduction claim in an IT contract dispute if Sale of Goods Act is excluded. Interesting points and not necessarily simple - I have a view, Mats has a view, but tell me yours? This is the best part in these seminars - sharing ideas and experiences and learning more! And finally thanks to Talentum and Salla Korhonen in particular for magnificent arrangements!

More to follow on this as well and next time I will write about M&A again - new blog under the way!