AI Vendors will draft contracts that limit their exposure in the event of a lawsuit. What are the most likely issues litigated in a commercial contract for artificial intelligence?

Data is the currency of AI. You need to ensure that you are protecting your data and making sure you have recourse in the event your data is compromised. Negotiating the right contractual language is key to mitigating risk.

Data Security, Data Poisoning, and Confidentiality are all issues that arise when an AI contract goes wrong.

By simply entering data, confidential information, or intellectual property into an AI functionality, you could be giving up your rights in that material. When negotiating with ERP vendors like SAP, Oracle, and Infor, you need to understand what rights that AI vendor has in any inputs, and more importantly, what rights you might be giving up in those inputs.


#erp #erplawyer #erpcommunity #erpfailure #saps4hana #oraclecontracts

AI vendors will typically use traditional software licensing or SaaS models to sell their functionality.

While that generally makes sense, nuances associated with acquiring AI functionality need to be accounted for and negotiated.

  • Warranties, remedies, and indemnity provisions all need to account for the risks that AI presents.
  • When acquiring AI, you need to understand the type of data you are entering into the AI software and what the AI vendor will do with that data.
  • You need to negotiate adequate warranties and representations to protect your and your customers’ data.

AI is transformative but presents a variety of risks.

  • Who owns the data generated by AI functionality?
  • What rights do you have to utilize that information?
  • Can you be sued for commercially exploiting the data generated by the AI you are using?

I discuss these issues in this clip from my upcoming YouTube video.

#businesssoftware #erp #saas #digitaltransformation #erpcommunity

Agile software implementation methodology contributes to ERP failure.

  • Drafting SOWs that include milestones, deliverables, and deadlines is challenging when Agile is utilized.
  • Its iterative approach is not compatible with holding your ERP integrator accountable.
  • Spending less time defining the product beforehand and trusting that the product will come together one iteration at a time is problematic.  
  • Focusing on (i) developing working software over a comprehensive product, (ii) collaboration over contract negotiation, and (iii) responding to change over following a plan all create challenges when it comes time to enforce contractual obligations – especially when deadlines, milestones, and acceptance testing criteria do not exist.

Agile is a software development methodology. It is not an ERP implementation methodology. It does not lend itself to carefully crafted Statements of Work with deadlines, milestones, and substantive contractual obligations.

This is a problem.  I discuss these issues in my latest YouTube video.

#erp #digitaltransformation #SAPs4hana #cloudsoftware #saas #erpcommunity

70% to 80% of all digital transformations fail. While you can debate that statistic, the reality is that your ERP implementation will take longer than expected, cost more than expected and you are unlikely to realize your expected business benefits. But why and what can you do about it? I discuss these issues in my latest YouTube video. #digitaltransformation #erpfailure #erpcommunity

The move to the cloud has been transformative, but negotiating cloud and SaaS contracts presents its own set of challenges.

The legal and business terms presented in cloud contracts are different than in traditional on-premise software licenses.

In a cloud contract, you need to aggressively negotiate substantial discounts off of the list price of the software, you need to cap the vendor’s ability to increase prices in subsequent terms, and you should obligate the vendor to assist you in transitioning your data to a new vendor upon termination.

You have no greater leverage with your vendor to negotiate meaningful concessions than before you commit to a multi-year term.

ERP vendors and integrators will emphasize the ERP software’s ease of implementation and fit for your business. It is not always true.

You must conduct due diligence, use a software selection process, and negotiate a strong contractual framework to manage the implementation project.

The software sales process is designed to minimize the complexity of the software, the implementation process, and functionality gaps.

How does this contribute to failure? Does it set up unreasonable expectations on the part of the customer? Who is responsible?

ERP software implementations and digital transformations can be challenging, and the most common reason for their failure is not technology but people.

To ensure a successful implementation, you must pay close attention to the statements of work in your software contract package. These documents should clearly define deliverables, milestones, deadlines, acceptance testing criteria, and change order procedures, among other things.

By including obligations that mitigate risk, you can help ensure success. Don’t let a lack of attention to detail be the cause of your #erpfailure or #digitaltransformation struggles.

As AI becomes increasingly prevalent in everyday life, legislators have taken notice, eyeing ways to regulate its use. Illinois has become the second state — after Colorado in May 2024 — to enact a law restricting AI use in employment. This new legislation builds upon existing protections in the Illinois Human Rights Act — a comprehensive law designed to protect individuals from discrimination in various aspects of daily life, including employment — and reflects broader concerns about AI’s role in perpetuating bias in hiring and other employment decisions.

Taft attorneys Marcus Harris, Benjamin Morrell, and Michael Leo Pomeranz recently published an article discussing some of the implications of the Illinois law. Click here to read it.

Understanding what to negotiate and who you are negotiating against is fundamental in leveraging the ERP contract negotiation process to your advantage.

You want to have a plan going into the negotiation process for what you will ask for, how you will mitigate risk, critical asks, and fall-back positions.

If you treat the ERP contract negotiation as an afterthought, you are setting yourself up for failure.

Marcus Harris discusses negotiation strategies in the video below.