Predictions 2009: A Gloomy Forecast for IT Lawyers?

January 5, 2009

Writing this from an Irish perspective and looking back at previous predictions, the tone this year will differ considerably.  It is difficult to be optimistic when faced with an economic tsunami as I sit here on my private beach populated by my technology practice colleagues and competitors.  Putting on a brave face, the following are a smattering of predictions:

  • Services of all shapes and sizes, but little work on the infrastructure supply side.  I doubt whether there will be more than a handful of ERP or similar large scale software projects during the year.  What we have been seen for the last few months and will continue to see is mainly service based projects.  Generally, these service procurements are on the low to medium end of the evolutionary and financial scales, with quite a lot of IT managed and facilities management type services;
  • A continued sparsity of IT or BP outsourcings domestically.  With the public sector a non-player (and certainly the closer one gets to central government) the domestic high end outsourcing market is limited.  There may be one or two large deals, as is enviable, but that is likely to be the extent, and they will be restricted to the private sector;
  • The continued slow take-up of software-as-a-service.  The offering seems to work best in conjunction with new ERP and similar software led projects and, as above, such projects are likely to be few and far between.  It would help the customers if the larger suppliers demonstrated a modicum of flexibility in commercial and legal negotiation;
  • Steady development of IT dispute work.  During the good times this was a rare work species, but the economic climate gives customers with problem child projects less ability to indulge wayward suppliers.  Also, a growth in customer disputes with database and application software suppliers looking for increased payments based on audit, tip-off or sheer opportunism.  Sooner or later, we may actually achieve an Irish IT/outsourcing litigation which proceeds before the Commercial Court all the way to judgement;
  • A tightening up of contractual requirements by the public sector, possibly originating with the Chief State Solicitor’s Office, representing primarily central government.  This would be of assistance to lawyers acting for the broader public sector, who frequently find themselves out on a limb in negotiating with the large IT suppliers.  While the positions adopted may have merit, they lack official sanction;
  • On the data protection side, we expect continued growth in what has been a busy area for quite some time now.  Also, we can fairly confidently predict further and greater high-profile data outages.  Draft legislation has been prepared to require the mandatory reporting of data security breaches in the financial services sector and we would expect a fairly broad political consensus on the matter; and
  • On the private sector side, continued good deals concluded by private equity.  Those with the capital are the rich kids in the sweetshop at present, a trend which one can only see continuing.

All in all, 2009 looks set to be a tough year.  However, depending on one’s firm and practice area, the grey cloud may have a silver lining.  The mooted consolidation in the financial services sector should give rise to some large scale M&A activity, which could have some considerable issues in IT and service consolidation.  Data protection will continue to grow.  Also, we see a likely increase in cost-cutting based service procurements.  After that, we must wait and see.

Pearse Ryan is a Partner, working in the Technology & Life Sciences Group of Arthur Cox, Dublin.