Should IT Legal Services be Productised?

With AI now increasingly a part of our professional lives, Clive Davies ponders whether there is room for more services to become products in the IT legal world.

Introduction

“Productise” means to “make or develop (a service, concept, etc.) into a product”. In this age of generative and agentive AI it seems reasonable to revisit the question of whether the services we provide as information technology lawyers, can or indeed should, be converted, at least to some extent, into discrete “products”. For my consultancy practice I have realised that there is merit in encapsulating the services I can offer in products such as Trouble Shooting Negotiation Support. But is this approach something which could be more generally applicable to a law firm, or indeed an in-house practice, in delineating and promoting the services they provide? As we debate the use of AI in contract formation and delivery, should we not also look at the intrinsic building blocks of the constituent processes?

This debate occurred when expert systems – software which uses databases of expert knowledge to offer advice or make decisions in such areas as medical diagnosis – were mooted several decades ago, and well before ChatGPT. The theory was that the knowledge of a true expert could be distilled into a “system” used by those with significantly less expertise to carry out a task that would otherwise require a skilled professional. The main challenge, as is still the case today with AI, was ensuring the knowledge of experts was captured correctly and included in the system by way of inputs and then updated appropriately as the subject matter evolved.

It seems timely to once again consider whether it may help us to break the specialist and very skilled services we provide into building blocks which could constitute distinct service modules. In the context of IT contract creation and delivery and early-stage technology disputes to what extent can a legal activity usefully be “productised”?

Procurement

Activity
A customer for IT services will commence the process of identifying its needs well before any contractual discussions. Suppliers determine whether to bid for this work when it is publicised. As lawyers we may not always be involved in these early phases, but it is where the seeds for the ultimate success or failure of the service delivery are sewn. The decision to outsource may come from an IT department or from senior management seeking to save costs or improve the service. The purchaser will make some attempt to define the required service and then test the market and commence a procurement exercise. At this stage, a range of potential suppliers who are individually approached or respond to an advert, will determine whether to bid. They will consider a number of factors including their ability to provide this particular requirement profitably and their realistic chances of winning a high-cost bid.

Service Product
This initial aspect of IT contracting is one where the processes are haphazard and not always very effective. In customers identifying the need for such a service and then articulating it and the potential marketplace for suppliers is carried out with varying degrees of effectiveness. Once a requirement is firmed up, they utilise their procurement function to locate potential suppliers. For complex IT outsourcing services, it is here where some fundamental and strategic errors are too often made.

• The actual requirement is vague and not properly articulated and defined.
• Potential benefits are poorly delineated and expressed.
• The driving rationale for the success of the procurement is cost and not the successful delivery of the service.
• The process for agreeing a contract with potential suppliers is antagonistic from the outset driving future bad behaviour.
• Not enough effort is put into ascertaining whether there are sufficiently skilled suppliers capable of delivering this service.

By contrast sophisticated IT outsourcing suppliers ought to know what to bid for and the solutions they can deliver successfully. In my experience, especially in-house, this is not always the case. The sales function is driven by a reward system that encourages seeking business to support a commission structure, rather than services the company can deliver profitably from within its existing portfolio. Often, the challenge of projects involving significant new development creating or transforming an existing service is severely underestimated. This is especially true if some key aspect of the service comes from a subcontractor providing new and untested technology. Sometimes the decision to bid is taken before the risks and opportunity are properly assessed through appropriate corporate senior governance processes and railroaded through without sufficient understanding and consideration.

There is scope for more legal involvement at this stage providing structural and strategic advice for both customer and supplier. This could be encapsulated in a service product in the form of a proactive checklist of key tasks setting out issues to consider and manage explaining the rational for each activity and sequences of actions to be followed.

For customers:

• Why is this procurement necessary.
• Is the service required properly understood and articulated.
• Have the benefits been delineated in a measurable way.
• Are there suppliers in the marketplace who can provide this service.
• Is the bid process selected likely to result in a successful service delivery and not just reward the lowest price bidder.
• Has senior management understood and endorsed this project.

For suppliers:

• Is there a realistic chance of winning the bid.
• Does the company already provide this or similar services.
• Will the service be capable of being delivered using a cost model which shows a profit.
• Does the company have the necessary skill sets and resources available for a winning bid process and successful delivery.
• Is the potential solution tried and tested or does it involve the application of new technology.
• Are there any key subcontractors especially providing products specifically developed for this service.
• Has appropriate governance been undertaken at a senior level which understands and endorses this bid.
• If the service is particularly complex or high value or involves supplies from other group companies, is the head office business and legal function on board with the opportunity.

Contract Creation

Activity
The legal terms and conditions for IT service contracts follow well-trodden paths and are generally well prepared. However, the devil in an IT outsourcing agreement is in the detailed schedules where the seeds of many delivery challenges and disputes are sewn. These are often produced in various formats from different parts of the business with varying degrees of quality and effectiveness. The draft contract is thus a patchwork of different components which do not integrate into a coherent whole. Lawyers are kept away from some key schedules until late in the negotiations when they discover their inadequacy and have to rewrite them. This involves additional time and cost and significantly complicates the negotiation and procurement process.

Service Product
Here a law firm or in house legal team could offer to provide the customer with a drafting “product” constructing the whole contract, not just the “legal” parts, utilising precedents, clause banks and AI tools coupled with the skill and knowledge of experienced practitioners. The legal terms and conditions could follow standard documents for this type of transaction. Importantly the process would require an outline or skeleton of the contract structure to be created before all the detailed provisions are drafted to ensure every aspect works together as part of a coherent whole. A starting point for all the schedules could be provided within this overall structure with guidance on using the correct terminology and definition regime. The technical, financial and process experts could participate in this contract creation process, under the guidance and direction of their experienced legal and procurement teams. This would be provided as a discrete and defined service for a fixed price to avoid the risk of the client thinking it could save money by doing the work itself. The approach is far more likely to result in a coherent and effective draft contract which will be easier to negotiate and agree.

One challenge, and possible opportunity, is constructively involving the potential supplier whose expertise would enhance the creation of particularly the initial draft schedules. This could also improve and potentially abbreviate the negotiation process because the supplier would make its contributions earlier and more effectively. The supplier would also feel more ownership of the process instead of being railroaded into accepting contract schedules it did not properly comprehend. This can be more challenging, but is still possible, in a competitive tendering process where a number of potential suppliers negotiate a draft contract with the customer as part of the procurement.

Contract Negotiation

Activity
This interactive process is one of the hardest to predict because it can follow many different paths. Often, the potential supplier is treated by the customer’s advisers in outsourcing negotiations as “the enemy” to be kept at arm’s length on the other side of the table. Efforts at joint and constructive solutions and documentation are hampered by a process which is seen as adversarial. Individual participants (not necessarily lawyers) see their role as protecting their side’s interests at all costs. Win-win goes out the door and the joint goal of a contract which delivers the required service while permitting the supplier to make a reasonable return is forgotten as fixed positions and negotiated compromises are fought over tooth and nail. In complex contracts for the outsourcing of a technology service this combative approach usually ends in tears and a contract not fit for its intended purpose.

Service Product
Productising the negotiation process is a challenge. The complex ebbs and flows of the negotiation of a detailed service agreement do not readily lend themselves to standardisation. Certain elements can however be productised, at least to a degree. Instead of just jumping into the contract at the first negotiation meeting, why not, for example, agree a “negotiation charter”? This would set out the expectations and anticipated outcome for the parties, together with the behaviour of each side required to achieve this. Joint negotiating goals could replace antagonism and be referred to when tempers fray.

Then each party could have a playbook setting out preferred positions and redlines. This would guide negotiating teams and provide consistency, ensuring that they “argued” over provisions by reference to stances which had a corporate seal of approval and did not just follow the whim of individual negotiators. These could include fall backs and structured decision trees with a recognised route into senior governance if the organisation’s starting position and fallbacks on say limits of liability could not be achieved. Negotiation scorecards could assist in identifying progress and where sticking points were arising. In effect the experience of past transactions and the things that mattered to bring a desired outcome could be codified to an extent for future generations of negotiators. This would avoid emotion and enhance the chances of a successful delivery.

Contract Delivery

Activity
Effective performance ought to be the objective all IT service contract negotiations. The parties should seek a defined service which can be delivered successfully in compliance with the contract in a manner that achieves the service standards specified. The customer should receive the business benefits it seeks while the supplier makes a reasonable return and enhances its reputation as a successful outsourcing company in the marketplace. Too often after the excitement and tension of a negotiation produces an accord both negotiating teams are happy with, who share a glass of champagne to celebrate, then responsibility is handed over to delivery teams who ignore all of this and literally do their own thing. The seven-hundred-page contract is consigned to the bottom drawer and ignored until the inevitable performance crisis arises and both sides start blaming each other.

Service Product
Here is where lawyers seem to fear to tread (at least, unless and until a dispute is imminent) there is real opportunity for a beneficial service product. This applies notably in private practice, but even in-house the legal function can be excluded or ignored to some extent post signature until something goes wrong. Instead of washing our legal hands of the deal and moving to the next one, why not create an after-signature contract service pack? This could be for a fixed price and contain the following elements, most of which are just good practice. Some aspects could be more for the customer or supplier, but many apply to both.

1. Contract Delivery Teams Site: Negotiation teams for buyers and suppliers use a SharePoint Teams site or similar online workspace to manage all the information about the developing contract and its governance. However, once the deal is done and the contract signed these sites are generally abandoned. Why not instead as a part of the service transform this into a live site for contract delivery? This could contain the final contract and related information and be used as a repository for ongoing material such as completed change control notes.
2. Handover Session: Crucial knowledge about the deal is vested in the negotiating team who are gone with the wind after signing. So, have a proper detailed and comprehensive session(s) to handover knowledge and material to the delivery team.
3. Contract Obligations Tracker: Anything from a simple spreadsheet to a complex AI created model can capture and identify the key activities the agreement requires each party to carry out. This summary clarifies and enables performance.
4. Change Management Guidance: Contract change notes are a crucial aspect of all IT service contracts. These should be entered into in accordance with the contract processes, stored and become part of the delineation of the required performance and associated reward. Creating an up-to-date conformed copy of the agreement every six or twelve months with all these changes captured is excellent practice.
5. Deep Dive Progress Review: Periodically, and more often during an initial project phase, the legal and delivery teams plus senior management could meet to discuss progress, review any concerns and look for improvements. This can flush out hidden or latent issues and act as a checklist for what is working well and could be incorporated into other contracts. A more radical and potentially risky, but potentially rewarding, approach would be to do this as a joint activity between customer and supplier.
6. Attendance at Senior Governance Meetings: Once a quarter a lawyer for each side could attend the most senior level of governance meeting when any contract successes and challenges should be discussed to provide a legal perspective.
7. AI Contract Chatbot: A well-constructed AI interface could be an effective first line of contact for ongoing contract concerns. It could link into the contract delivery Teams site referred to above and find relevant contract references and obligations.

Some of these activities already occur in suppliers and customers, but usually in isolation and not as a part of a coherent service package. One advantage of this approach is the potential for continued contact by the legal function with the delivery (or receipt) team, who are then far more likely to seek legal support more often and earlier than would otherwise be the case.

Disputes

Activity
As a commercial lawyer I have witnessed many contract delivery challenges, disputes and resets and understand what goes wrong with IT outsourcing contracts and how these situations can be resolved. I will focus on the early stages of potential disputes rather than after litigation has commenced when more well-worn dispute practices will apply. Many project delivery teams fail to recognise the significance of contract failure or appreciate the consequences of failing to remedy this. Senior management and lawyers are often involved far too late. Project board meeting minutes, emails, IM’s, progress reports, problem reviews, even verbal exchanges in the pub, all have the potential to take on new and potentially damaging meanings as a part of litigation discovery processes under English law.

Service Product:
As the legal advisers to the customer or supplier we could create a guidance note on how to prevent and then manage the early stages of a potential dispute. This would include a mixture of early warning signs and good project and dispute practice.

• In the project phase teams often operate a RAG Report – a spreadsheet with the progress of delivery tasks recorded as red, amber or green with obvious connotations. Not all tasks which have gone red will be contract breaches, BUT if there are a series of these and project management meetings are failing to fix them then it is a potential problem and should be escalated.
• Most projects have many milestones only some of which have a contractual impact like triggering payment. However, if there is a general trend of failing project milestones and any missed contractual milestones management and the legal team should be alerted.
• Contract notices will be required in certain circumstances and are a sign that something has gone wrong. These should follow the contract processes and the legal team advised.
• An interactive checklist on controlling information including keeping good records of all meetings and contract correspondence.
• All project or contract changes should be recorded, documented and implemented.
• Review of service level performance every month monitoring any service level credits.
• Avoid keeping potential delivery problems close to the chest within the immediate team perhaps to protect themselves. The consequences of failure are far worse than the embarrassment of not advising senior management.
• Resource management is critical especially when skills can be in short supply and competed for by other parts of the business.
• Be aware of any security or data breaches as these can have far reaching consequences.
• Failing subcontractors or suppliers especially of key components should be carefully monitored against their respective subcontracts and any breaches flagged.
• If things are going wrong, bring in a “trouble shooting team” with no previous involvement with the project to provide a fresh perspective.
• If in doubt, contact your legal advisers for early-stage advice.

Conclusion

As with expert systems, the specific ability and professional knowledge we bring as IT lawyers to contract issues cannot always be readily compartmentalised. However, by consciously dividing the services we provide into their constituent parts with associated products, it can help promote them and determine where our expertise can add true value. This can fill gaps where we are traditionally not engaged as much as we could usefully be. Ultimately a degree of productising of our services will benefit our clients by enhancing the success of the IT services they procure or provide. It will also improve our ability to make suitably rewarded and effective professional contributions, even in this age of generative and agentive AI.