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Best Practices for Technology Development and Sourcing Transactions

  • Best Practices for Technology Development and Sourcing Transactions-

    Perhaps the most intuitive approach to technology innovation is for a company to undertake innovation projects using its own employees and other in-house resources. There are many positive aspects of this traditional approach:

    • the company has full control of the project and can ensure compliance with company protocols and project work plans;
    • the company retains all the upside of a successful project;
    • the company can gain a competitive advantage by achieving vertical integration;
    • the company can customize project work activities and technology specifications to whatever degree the company deems appropriate; and
    • the company avoids having to manage a relationship with a third-party service provider or strategic partner whose interests are not fully aligned with the company’s.
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Best Practices for Technology Development and Sourcing Transactions

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  • Best Practices for Technology Development and Sourcing Transactions-2

    Perhaps the most intuitive approach to technology innovation is for a company to undertake innovation projects using its own employees and other in-house resources. There are many positive aspects of this traditional approach:

    • the company has full control of the project and can ensure compliance with company protocols and project work plans;
    • the company retains all the upside of a successful project;
    • the company can gain a competitive advantage by achieving vertical integration;
    • the company can customize project work activities and technology specifications to whatever degree the company deems appropriate; and
    • the company avoids having to manage a relationship with a third-party service provider or strategic partner whose interests are not fully aligned with the company’s.

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.