Law and Technology 2009/2010Master Thesis
Topic: Continuity in Information TechnologyOutsourcing
Desislava Valentinova Stankova-BogoevaANR: 434659E-mail:d.v.stankova-bogoeva@uvt.nl
Thesis supervisor: prof.mr.drs. C. (Kees) Stuurman
2 |Page
TABLE OF CONTENTS
ABSTRACT ........................................................................................................................................................ 4
LIST OF ABBREVIATIONS ................................................................................................................................... 5
INTRODUCTION ................................................................................................................................................ 6
1.
BACKGROUND AND THEORETICAL FRAMEWORK ................................................................................... 12
1.1.
B
USINESS CONTINUITY AND
IT
SERVICE CONTINUITY
..................................................................................... 12
1.2.
O
UTSOURCING RISKS
........................................................................................................................... 14
1.2.1.
Risk differentiation based on ITO project lifecycle ................................................................... 14
1.2.1.1.
Outsource decision risks ................................................................................................................... 14
1.2.1.2.
Service provider selection risks ......................................................................................................... 15
1.2.1.3.
Operational risks .............................................................................................................................. 15
1.2.1.4.
Termination and exit risks................................................................................................................. 17
1.2.2.
Risk differentiation based on the nature of the risk event........................................................ 17
1.2.2.1.
Traditional IT projects risks ............................................................................................................... 17
1.2.2.2.
Disaster related ITO risks .................................................................................................................. 17
1.2.3.
Cross-border project risks ....................................................................................................... 18
1.3.
T
HE
IT
OUTSOURCING CONTRACT
............................................................................................................ 19
1.4.
R
ELEVANT LEGISLATION AND LITERATURE
.................................................................................................. 21
2.
NON-IT SPECIFIC TOOLS OF RISK ALLOCATION AND SHARING IN THE ITO CONTRACT ............................ 22
2.1.
N
ATURE OF THE OBLIGATIONS
................................................................................................................ 22
2.2.
L
IMITATION OF
L
IABILITY
....................................................................................................................... 22
2.3.
L
IQUIDATED
D
AMAGES
......................................................................................................................... 23
2.4.
I
NDEMNIFICATION CLAUSES
................................................................................................................... 23
2.5.
D
ISCLAIMERS
..................................................................................................................................... 23
2.6.
I
NSURANCE
....................................................................................................................................... 24
2.7.
F
ORCE
M
AJEURE
................................................................................................................................ 24
2.8.
I
NSOLVENCY PROVISIONS
...................................................................................................................... 24
3.
GENERIC MEASURES FOR ITO PROJECT CONTROL .................................................................................. 27
3.1.
S
ERVICES DEFINITION AND
S
ERVICE
L
EVEL
A
GREEMENT
(SLA) ........................................................................ 27
3.1.1.
Services definition .................................................................................................................. 27
3.1.2.
SLA ........................................................................................................................................ 28
3.1.2.1.
Effective approach in defining service levels and metrics ................................................................... 28
3.1.2.2.
Service credits regime ...................................................................................................................... 30
3.2.
O
THER MEASURES
............................................................................................................................... 30
4.
SPECIFIC ITO CONTINUITY MEASURES .................................................................................................... 33
4.1.
B
ACK UP AND DISASTER RECOVERY PROVISIONS
........................................................................................... 33
4.1.1.
Disasters Overview................................................................................................................. 33
4.1.2.
Disaster protection measures ................................................................................................. 34
4.1.3.
Disaster recovery plan/Disaster recovery agreement .............................................................. 35
4.1.4.
Limitations ............................................................................................................................. 37
4.2.
S
OURCE
C
ODE
E
SCROW AGREEMENTS
...................................................................................................... 38
4.2.1.
Source code ........................................................................................................................... 38
4.2.2.
Source code escrow agreement .............................................................................................. 39
4.2.3.
Limitations ............................................................................................................................. 42
4.3.
S
TEP
-I
N
R
IGHTS
.................................................................................................................................. 43
3 |Page
4.3.1.
Step-In Rights definition ......................................................................................................... 44
4.3.2.
Scope of Step-in Rights ........................................................................................................... 44
4.3.3.
The right to buy ..................................................................................................................... 46
4.3.4.
Other key aspect of step-in rights ........................................................................................... 46
4.3.5.
Limitations ............................................................................................................................. 47
4.4.
E
XIT
P
ROVISIONS
................................................................................................................................ 49
4.4.1.
Exit Plan................................................................................................................................. 49
4.4.2.
Continuous service provision .................................................................................................. 49
4.4.3.
IPR ......................................................................................................................................... 50
4.4.4.
Transfer of assets ................................................................................................................... 51
4.4.5.
Transfer of contracts .............................................................................................................. 51
4.4.6.
Transfer of personnel ............................................................................................................. 52
4.4.7.
Exit assistance and consulting ................................................................................................ 54
4.4.8.
Exit costs................................................................................................................................ 54
4.4.9.
Limitations ............................................................................................................................. 54
5.
CONCLUSION ......................................................................................................................................... 56
APPENDIX 1 .................................................................................................................................................... 60
ITO
R
ISK
M
ATRIX
............................................................................................................................................ 60
APPENDIX 2 FIGURES FROM THE LITERATURE REVIEW ................................................................................... 64
2.1.
P
OTENTIAL
T
YPES OF
E
XPOSURE
................................................................................................................... 64
2.2.
P
ERCENTAGE OF ORGANIZATIONS THAT USE OUTSIDE SERVICE PROVIDERS
................................................................ 65
REFERENCES ................................................................................................................................................... 66
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