TOP TEN: Opportunities and Legal Risks Considerations When Embracing New Technologies
From customer-facing artificial intelligence systems, to cloud-based applications that have created the digital gig economy, or mobile-based banking systems that facilitate fast payments, in recent years a number of industry sectors have been challenged by the development of digital and data-based technologies by start–ups. These technologies promise to transform every organisation’s relationship with its customers and introduce unprecedented levels of efficiency within its business.
But understanding the limitations that may exist when forming relationships with new entrants to a market is key to determining the real benefits that any organisation can hope to obtain by adopting new technologies. This article looks at the top 10 opportunities and legal risks which every organisation should consider before embracing new technology.
For organisations that are looking to strengthen their position in established industry sectors, adopting new technologies may provide the opportunity to:
1. Demonstrate innovative thinking to customers
Proving to customers that your organisation is committed to continually improving the manner in which it conducts its business by adopting new technologies should lead to better customer awareness of your business and a stronger reputation for customer service.
2. Benefit from economies of scale
Adopting new technologies from providers that offer a “one to many” or white-labelled solution for businesses to interact with their customers can be an effective way of rapidly expanding your business offering to match that provided by more established organisations in an industry at a much lower cost of entry.
3. Reset your approach
Many organisations are burdened with having to navigate a network of overlapping and sometimes conflicting legacy systems, business practices and legal terms that have built up over the years when maintaining and growing their businesses. Offering customers a new way to interact with your business may provide the opportunity to reduce and possibly eliminate your reliance on these legacy systems, practices and agreements and to restart your customers’ relationships with your organisation from a more straightforward and favourable position.
4. Expanding the number of channels with which you interact with customers
Increasing the diversity with which your services can be provided, particularly by offering online and device application-based technologies, can lead to customers interacting with your organisation more regularly in ways that suit their requirements.
5. Improve your relationship with customers
Using new technology to provide a common interface or platform with which customers can interact with your business can enable your organisation to standardise the ways in which it communicates with its customers and obtain better data and more reliable insights into the services that your customers are using and are interested in receiving.
The legal risks
However, organisations may have to address some of the following risks when negotiating with providers of new technologies:
6. The viability of the start up’s business
It is important to consider the financial strength of the start up that your business is going to be contracting with and the level of service that you expect to receive. Will your organisation be one of its first clients or will the provider be financially dependent on you or a small number of other clients to continue operating its business? If so, your business should determine how important the new technology will be to your business strategy and, if it will be important, how it would be able to continue using the technology or transfer to an alternative supplier should the provider prove unreliable, suffer financial difficulties or cease trading, particularly if the technology is being hosted by the service provider or your organisation is reliant on them to maintain it and support your use of it.
7. The suitability of the new technology
Despite being innovative, new technology is frequently provided on an “as is” basis, with few assurances that the solution will be suitable or can be adapted for an organisation’s requirements or will be complete in any way. An organisation looking to adopt new technology should consider how it will be used within the business and whether the solution has been sufficiently tested to satisfy those requirements, how the use of it may change over time and how flexible the technology and the service provider will be to respond to and accommodate any new or changed requirements.
8. Future changes to the service
Service providers of new technologies typically negotiate on their own standard terms and conditions which allow them to change the availability, functionality and the features of the solution and the terms on which it is provided over time, particularly where that service is dependent on features that are provided by third parties. It will be important to ensure that the supplier cannot make any changes that would be detrimental to the manner in which your organisation hopes to use the new technology and that sufficient prior notice or time to object is provided in advance of any proposed change being implemented.
9. Dealing with data
New solutions may process data received about your organisation and its customers. This data and the analysis that a service provider gathers about the manner in which its technology is being used, may be immensely valuable and commercially sensitive. So ensuring that your organisation retains ownership of and access to its data and that the service provider is obliged to keep it secure and will not misuse it will be very important. In addition, most organisations will be subject to laws that restrict the manner in which personal data can be used, stored by, transferred to and shared with third parties. So making sure that the service provider’s solution processes any personal data in compliance with those obligations and, in particular, that your organisation has obtained sufficient assurances about the location and safe keeping of any data that is provided to the supplier, will be vital.
10. The start up’s liability
Start ups will typically exclude or extensively limit the circumstances under which they may be liable to their clients for breaches of their contracts or failures to comply with applicable laws. It will be important for your organisation to identify the key types of failures that it will expect a service provider to compensate it for, which may include failure to keep sensitive information confidential, failure to protect data from security breaches and claims by third parties that use of the solution by your business infringes their intellectual property rights.
Do you have any suggestions that might be added to this list – or ideas for an entirely different Top Ten? The editor’s waiting to hear them: firstname.lastname@example.org…
About the Author
Oliver Yaros is a partner in the Intellectual Property & IT practice and a member of the Technology Transactions group at Mayer Brown in London. He advises on global financial industry utility projects, technology and business process outsourcing projects and IT systems procurement transactions as well as advising a range of clients on many related e-commerce, data protection and privacy law issues.