Clear Contracts Craft A Successful ASP Relationship | Article

Contrasting starburstRobert Alpert has a unique view on the ASP world. Currently he is executive vice president and head of business development for eAttorney Inc. in Atlanta, Georgia, an ASP specializing in the legal industry. However, Alpert was a litigator before joining the ASP. So he has sat on both sides of the conference table and observed what makes a good outsourcing contract.

Alpert says attorneys have to walk a tightrope when dealing with the confidentiality issue. Attorneys are obligated by their code of ethics to keep sensitive client information confidential. When clients are consummating a deal with an ASP, their attorneys must make sure they take appropriate protections to keep privileged information confidential.

The confidentiality issue extends to the protection of client data. Attorneys must make sure an ASP outsourcing contract ensures that their customers’ data remains confidential. The ASP must understand that its other users can not have access not even accidentally — to this user’s data. Alpert says buyers should insist in their outsourcing contracts that the ASP warrant it will protect the confidentiality of their data. If the ASP fails to do this, it is a clear breach of that warranty.

Access is another legal issue. All buyers must have access to their data at the ASP’s site. And the language of the contract must make sure it is clear the buyer owns its data. If the relationship sours and the buyer decides to move to a friendlier ASP, the contract must allow the buyer to retrieve its data without even a raised eyebrow from the vendor.

Insist on Liability Insurance

In addition, the contract must ensure the buyer can import its data from the old ASP in a form it can use. This should also be spelled out in the outsourcing contract, Alpert says. He’s seen instances where the ASP handed over the data all right, but it was in a form that was not readily importable to the buyer’s IT platform. That made the transfer all but useless.

Reliability is crucial, too. ASPs have to guarantee a certain percent of availability. The service level agreements (SLA) should include penalties if the site is down more than is promised. Buyers must have the ability to bring a claim against the ASP for the damage they have suffered while the ASP site was unavailable.

Alpert suggests that ASP buyers check to see if their outsourcing provider has liability insurance which covers IT errors. He suggests asking the ASP to produce a certificate of insurance before signing an outsourcing contract.

The reason for the insurance is that many ASPs are young companies whose revenues can to be small. Not everyone has deep pockets, which creates a problem if the damaged buyer wins a judgment. The insurance certificate guarantees there will be compensation available. “If you have to sue the ASP, you want to make sure there are enough dollars so you recover,” observes Alpert.

Buyers also “need to do their homework” and check out their prospective outsourcing supplier. He suggests selecting a provider who has been in business a few years because experience does count.

It’s a good idea to talk to the customers of your first choice. Alpert says some of the questions you should ask them are:

  • “Has your data ever been corrupted?”
  • Did someone else ever have access to your data?
  • Did you have a problem accessing your data?

Be Sure You Understand Scope

Communication can be a problem in any relationship. But it is crucial for buyers to understand the scope of the outsourcing agreement from the outset. Not understanding the boundaries can become a costly mistake. Alpert tells the story of one client who assumed that the outsourcing provider was handling all back up activities. However, the contract clearly stated that was not the case. “The buyer clearly didn’t understand its obligations,” says Alpert.

You know the rest of the story. When the buyer changed software, it lost its entire billing system. It was in for a rude awakening when it discovered its ASP did not have the data on a back up disk. It took the buyer three months using 10 temporaries to recreate the billing database. The price: lots of emotional agony and $50,000.

Spelling out all activities in advance helps. In his years as a litigator, Alpert says most of the lawsuits that ended up in court stemmed from contracts that did not clearly define who was to do what up front. “The clearer the contract, the better,” he says.

Lessons from the Outsourcing Primer:

  • Understand the scope of the agreement at the outset. Misunderstandings can lead to costly mistakes.
  • After you select a supplier, call its customers and ask tough questions.
  • Make sure the ASP has a certificate of insurance. This insures you can recover your damages if you win a judgment against the ASP.
  • If you have to end the relationship, make sure you can retrieve your data from the ASP in a form you can use.

1 Comment on "Clear Contracts Craft A Successful ASP Relationship | Article"

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  1. Liability insurance is important, but what you are looking for is errors & omissions insurance, also known as professional liability or media liability insurance. Regrettably, these types of insurance are not standardized so an insurance certificate may not be sufficient to protect you. It is essential that you secure a detailed summary of the coverage or even a copy of the insurance policy. You are looking for several essential things: (1) the description of the covered operations, (2) the period of insurance, (3) the retroactive date, (4) the size and quality of the insurer, (5) the policy limits and deductible, and (6) any restrictions which may limit the coverage you expect. You should engage a qualified insurance professional to help you outline precisely what you need then work with you and your attorney to be sure that your requirements are clear and part of your contract and that you have a right to review the insurance and even insurance policies of your vendors.

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