Best Practices for Technology Development and Sourcing Transactions

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In a traditional outsourcing agreement, the customer relies on a service provider to provide the relevant expertise to implement technologies outside the customer’s core functions. Outsourcing is a proven and powerful tool to achieve cost savings and the standardization of technology across an organization, but the outsourcing model has some notable deficiencies when evaluated as means of driving technological innovation:

  • Outsourcing agreements typically feature detailed descriptions of services and related technology as a way of ensuring that cost savings will be achieved while maintaining services of acceptable quality. For that level of detail to be possible, the relevant technology must already be available in the marketplace at the time the outsourcing contract is negotiated. The focus, then, really is the efficient implementation of a proven technology, not technology innovation.
  • Outsourcing arrangements are rarely structured to incentivize innovation. Service providers want to retain sole ownership and control of as much technology as possible to leverage across their customer base.

In recent years, the pace of technology and business change has rapidly increased, requiring new commercial models and changes to the existing models. Companies – all companies, not just technology companies – must now regularly update technology across their entire organizations and customer-facing services and products.

Successful technology projects boost revenues, distinguish a company and its offerings from the competition, and transform and improve a company’s relationships with its customers. Failure, on the other hand, can have a profound impact on product development, customer service and market reputation for years to come. Consequently, planning for technology innovation and deployment projects requires careful mapping of strategic objectives, deliverables, and realistic work-around options. 

Laurence Jacobs and Nicholas Smith, partners at Milbank, Tweed, Hadley & McCloy, have identified a variety of transaction structures that companies can use to develop new technologies and to leverage existing infrastructure, technologies, and customer bases. They have also focused on the relative strengths and weaknesses of these models in fostering technology innovation and best practices when designing and managing a project to develop and deploy technology or technology services.


Related Topics : A Big Market for Big Data Jobs, Midmarket CIO, IT Management Automation, SharePoint, Technology Markets

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