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What Satyam's ownership change means to customers

Randall S. Parks | April 13, 2009
As the fallout from the Satyam scandal continues, many outsourcing clients of the beleaguered Indian outsourcer are examining their options.

* Escrow key supplier-owned software or alternative protections against loss of critical software in the event of supplier failure. Further, frequent delivery of data and developed code is a key protection against unforeseen events.

* Gain assurances as to continuity of key staff regardless of any reduction-in-force or restructuring.

* Cure ambiguities in scope-of-work definitions to eliminate opportunities for dispute.

* Expand service levels and related performance credits to provide objective metrics for key functions and rapid access to corrective measures.

Where termination is a possibility in the future, the change in ownership might also provide an opportunity to engage in a more comprehensive review of the customer's exit rights, confirming or negotiating for:

* Rights to acquire key equipment and facilities.

* Rights to acquire separate licenses for critical software.

* Step-in rights for critical functions.

* Rights to hire key supplier staff.

* General termination assistance requirements for the period necessary to complete any re-sourcing.

Of course, while the agreement is open, customers may also want to address other issues not directly related to the change of control, including scope and price.

In any case, customers should critically evaluate their new partner and their specific rights under their agreements. Some agreements may limit termination rights upon a change of control, requiring a more creative response. Satyam's new owners are likely to have allowed for some customer attrition in their bid; while they are likely to make accommodations to retain revenue, customers making overly aggressive demands may find themselves forced to find a new service provider.

Randall S. Parks, partner and co-chair of the Global Technology and Outsourcing Practice Group at Hunton & Williams LLP, focuses his practice on complex commercial contracting matters, particularly business process and information technology outsourcing, licensing, systems acquisition, development and integration agreements and joint ventures.

 

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