Companies Not Taking Contractual Precautions

Contract win

Technology and systems failures have caused significant disruption to UK firms in the past year but few are taking the necessary contractual precautions to minimise the risk of any loss or damage, according to research commissioned by Technology Law Alliance.

The research, which was commissioned with business leaders at 203 UK companies, including 21 telecommunications companies, reveals that two thirds (65%) of firms have lost revenue as a result of a technology or systems failure in the past year. Of these, the majority (44%) said that a key project was delayed or halted as a result and one in four (27%) reported that a customer was lost as a result.

Stephen Ollerenshaw, director at Technology Law Alliance, a specialist law firm advising companies on IT contracts, outsourcing and e-commerce, said:

“Technology or systems failures can cause considerable business disruption and damage corporate reputation too. Businesses should take a preventative approach by ensuring they have adequate protection in IT contracts. The process of agreeing a robust contract often drives out the issues and risks in advance and allows a customer to consider how it would mitigate problems should they arise.

“In particular, these contracts should include proper testing and acceptance provisions, appropriate governance processes, and measures to help a customer if things go wrong. These measures might include robust disaster recover provisions; the ability to step in to a failing contract; and adequate service handover in the event of termination.”

For the majority of telecommunications companies, the research revealed that the top IT-related risks for the year ahead are cyberattack (71%), such as hacking or data theft, and unexpected systems failure, causing downtime (62%).

“Cyberattack is perceived as a growing threat for many sectors and the high-profile attack on Sony in 2014 has emphasised the damage it can cause operationally and in terms of corporate reputation. Businesses entering into a contract with suppliers of any kind of systems support must prioritise security,” commented Stephen Ollerenshaw.

Just under half of telecommunications companies (48%) believe that transferring data to the cloud if the biggest IT-related opportunity for the sector in the year ahead.

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David Dungay

Editor - Comms Business Magazine