Best Practices for Technology Development and Sourcing Transactions

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Strategic alliance agreements of this sort are often rather complex, so detailed planning and documentation are required. Issues that can prove particularly challenging in such collaborations are issues relating to customer relations, revenue-splitting, cost and liability allocation, confidentiality, and ownership of newly developed intellectual property. Example of key questions include:

  • Should one party or both parties be the face of the integrated offering to third-party customers?
  • What if customers demand that they deal with only one service provider, in effect requiring that in the customer contract, one collaborator is the subcontractor of the other collaborator?
  • How should revenues and responsibility for costs be split between collaborating entities?
  • If a customer purchasing the integrated services offering of a strategic alliance brings a claim against one or both of the collaborators, how should that liability be allocated?
  • Presumably, collaborating parties will need to disclose confidential information of other collaborators from time to time (e.g., as part of a sales proposal). Which confidential information may be disclosed in this way, and in what circumstances?
  • If the innovative technology is genuinely created via a joint effort, who should own that innovation? What about licenses to use that innovation? Should that allocation of IP and royalty rights change if the collaboration is dissolved at a future date?

These are all issues that should be worked out and clearly set forth in the collaboration agreement to avoid later conflict and unpleasant surprises.

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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