Proactive IT Deveopment Agreements and Strategic Value Creation

Emil Christoffer Skipper

Student thesis: Master thesis

Abstract

This thesis investigates the question whether the concept of proactive contracting can contribute to the value creation of IT development agreements. Due to their innovative and complex nature, vendors are constantly exposed to a high risk of breaching the contract by way of late performance or defective delivery. Additionally, projects often turn out to be more costly than originally intended to the disadvantage of the buyer. The seed of legal disputes is sown! This thesis suggests that the IT development contract should be used, proactively, as a strategic tool of relational governance, instead of a mere tactical legal document, which is often the case today. The contract should focus on how to avoid disputes, how to create value, and how to build up a prosperous transaction. Rethinking the role of the contract, may provide companies with an excellent opportunity to create competitive advantages by nurturing long-lasting alliances and partnerships. Furthermore, this thesis shows that contracts should embrace agile methods rather than the traditional waterfall method. The agile method is flexible and well suited for complex business transactions, whereas the waterfall method is bureaucratic and oriented towards remedies for contract breach. Consequently, the pursuit of the waterfall method may turn out to be an expensive business strategy. From a legal perspective, however, the agile contract is not yet a well-established and fully developed concept in the Danish legal tradition. Managers, IT people, and lawyers, thus, need to collaborate closely in order to design a proper legally binding agreement, which balances agility and flexibility with stability and clarity. This thesis suggests that this can be done fully, in accordance to Danish contract law. In order to obtain agility, the development contract must contain a framework agreement, which contains a number of relational protective safeguards. The stability can be achieved by drafting a separate contract for each small iteration, which contains regular terms such as price, delivery, requirement specification, warranties, etc. The iterative contracts would, however, still be subject to content of the relational framework agreement. Overall, a design like this would make the contract more proactive and strategic.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages81