Pitfalls in large system renewal plans can be avoided – The customer’s ability to buy is one of the factors crucial for success
May 29, 2018
LocalTapiola will renew its insurance system in one of Finland’s largest digitalisation projects. In the EUR 200 million project, scheduled to last about ten years, LocalTapiola’s insurance systems will be renewed and growth potential for the digital service process created. Sami Rintala, Lexia’s partner and Head of the ICT and technology practice has acted as counsel for LocalTapiola in the contract negotiations.
“Renewing a major system like an ERP is a huge project. If it goes wrong, it can go really wrong,” says Sami Rintala.
Perhaps somewhat surprisingly, lawyers are the experienced professionals in ICT projects. Sami has followed the recent media discussion of system projects with great interest, and thanks to his vast experience, has identified the things that have gone wrong. An experienced ICT lawyer is familiar with the trade customs and market practices of the industry and knows how to analyse the risks involved in such projects from a legal point of view. However, each contract negotiation is unique, as the views and interests of the parties are coordinated.
Contractual terms and conditions must be adapted to the needs of business enterprises – not the other way around
The acquisition process may fail in the initial stages, if the buyer’s and seller’s views do not meet or they do not have a common goal. The customer’s skills in purchasing ICT projects plays a key role in the success of these projects.
“Lawyers must understand the business side as well,” says Janne Kärkkäinen, Director ICT-Finance & Vendor Management at LocalTapiola. He stresses the importance of stakeholder alignment. All the key persons in management need to understand the project and its goals.
The purchaser must also consider how integration between existing systems and components with the new system will be performed and who is responsible for such integration.. If the purchasing company wants a turnkey delivery, it must be included in the agreement.
“It is essential to clearly include all key issues concerning both parties in the agreement,” says Janne Kärkkäinen.
“Large projects easily become too extensive, so consider using Agile or SAFe-project methodology for developing and rolling out the system,” Sami Rintala adds.
Sami Rintala and his team have counselled LocalTapiola in the negotiations e.g. with CGI and Tata Consultancy Service.
“A good lawyer must know how to address problems frankly and not beat around the bush. The ability to be flexible if necessary is important as well,”, says Janne Kärkkäinen, responsible for ICT procurement at LocalTapiola.
Lexia’s tips for a successful system project:
- Specify what your company needs and wants. And what you do not need.
The system must produce what the company wants. Prepare precise definitions of what you want and what you are about to buy.
- Make quality the key criterion when inviting tenders.
Focussing solely on the price may prove costly. Consider what your company really needs, and make that the starting point for the project.
- Any issues that are unclear in the slightest must be clarified in the agreement.
Do not assume anything. Instead, demand that any issues that are unclear in the slightest must be clarified in the agreement.
- Test carefully and for as long as necessary.
Never let anything that has not been properly tested proceed to roll-out. When it is time for the roll-out, do it in stages, starting with part of the system that has the smallest adverse impact on your business, should the roll-out not succeed.
Sami Rintala, Partner, tel. +358 50 487 2031, firstname.lastname@example.org